Most homeowners don’t worry about foreclosing on their home until it is too late. While nobody goes into purchasing their new family home thinking they’ll foreclose, it’s a good idea to consider the possibility. The following tips should help avoid foreclosure before it’s even a possibility.

1. Never Go over Your Budget

Know from the start of your home search what your budget is. Look at your finances and figure out what you can afford each month without limiting yourself. Most experts agree that the amount paid for your mortgage (and associated fees) should not be more than 30 percent of your total monthly income. This means if your total monthly income is $2,000, your mortgage payments shouldn’t exceed $600. If your total monthly income is $5,000, your mortgage payments shouldn’t exceed $1,500.

2. Choose a Fixed Rate Loan

Choosing a fixed rate loan means knowing your mortgage costs for the foreseeable future. “Fixed rate” means your payments can’t change and there will not be any surprises down the road. An “adjustable rate” mortgage is the opposite, and means that your interest rate can go up or down based on the current economy.  

3. Prioritize Mortgage Payments

Knowing the priority of your bills can help if there ever comes a time you’re strapped for cash. Your mortgage payment should be the very first item on that priority listing. There are many things you can go without, but a roof to sleep under is not one of them.

4. Choose Early Payments

When deciding on a mortgage, choose one that allows for early payments without penalties. The sooner you pay off your mortgage, the sooner you can forget about going into foreclosure. At the end of your mortgage, the only thing you need to worry about are your property taxes.

Be a smart homeowner and make those early payments whenever the opportunity arises. Consider a 30 year mortgage, which requires a total of 360 payments. With four extra payments made per year, your 30-year-mortgage will only take 22.5 years.  

5. Create an Emergency Mortgage Fund

Job loss, unexpected medical expenses, and other unforeseen events can happen, no matter how hard you try to prevent them. Besides considering early payments in your budget, you should also be contributing to an emergency fund. Even saving 1 or 2 percent of your income a year can go a long way to helping out when an emergency arises.

Nobody goes into purchasing a home thinking they will be in danger of going into foreclosure. Unfortunately, it is always a possibility. The tips listed above can help homeowners avoid a foreclosure from the very beginning of their home buyer’s journey.

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