Three Things that cause Home Foreclosures Articles | Foreclosure

By: HomeForeclosures101.com Admin

We hear about or read about home foreclosures in the news every day. It is happening all around us and some say it will continue to get worse before it starts getting better. Some people have a difficult time understanding how so many homeowners can have this problem. In reality, it boils down to just three things.

The three things are somewhat broad and general of course, but approximately 90% of foreclosures fall into these categories.

1. Change in Job Status

This affects the most homeowners, when they find themselves out of work unexpectedly. They get laid off from a well-paying job and to compound the problems they are unable to find another one which pays just as well. In some cases they are unable to find new work at all. If the homeowner is not working, or their new job does not earn them as much money, then obviously they may find themselves unable to afford their mortgage payments.

2. Change in Health

This broad category can actually include many things. There may have been a death in the family for example, or someone may have encountered large medical bills. If the homeowner themselves started having health problems, not only have they probably incurred large medical bills, but they have very likely also missed work as well. These unexpected expenses or medical problems eat away at savings very quickly. If the health condition has caused the homeowner to miss work, then of course the household does not have as much income coming in to cover their regular bills too.

3. Bad Financial Decisions

This is yet another very broad category which can include many things. If a homeowner for example, runs up a large amount of credit card debt, they find themselves quickly losing ground with being able to pay all of the bills each month.

A common problem for the current foreclosure crisis however, is due to adjustable-rate mortgages which many homeowners agreed to. When they initially signed up to the agreement, they got a great deal on interest rates to start with. However, there was a sting in the tail, that same mortgage contract said that their interest rates would rise over time. The homeowner either did not understand that this would happen, or they did not realize just how high their monthly mortgage payments could go.

For example, suppose a homeowner found themselves with mortgage payments of about $1000 to start with, but after six months to a year or so those payments jumped up. For some deals it may have jumped to "just" $1500, while others may have found themselves facing a $2000 or more per month mortgage payment.

In many cases people had stretched themselves to afford the initial monthly payment in order to live the dream of owning their own home. They either did not realise, or did not pay attention to, the fact that the rate not just could, but would rise, within a fairly short period of time. When the payment amount did increase, they inevitably were not financially capable of handling such a large increase in such a short period of time. Defaulting on the higher payments of course can cause their home to go into foreclosure.