Foreclosure Causes:
Three of the Top Home Foreclosure Causes
We see it on the news. We hear about it from friends. If you've living in the U.S., it seems to be everywhere: home foreclosures.
It's happening all around us, and many leading economists say it will continue to get worse before it starts getting better.
Those of us in a comfortable living situation may find it difficult to understand how so many homeowners can have this problem.
Here are three common sense causes of home foreclosure:
1. Change in job status.
For most homeowners, 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 doesn't earn them as much money, then obviously they may find themselves unable to afford their mortgage payments.
To compound things, oftentimes a job that comes closest to the old salary involves moving to a city where living costs are outrageous. Did you know that in many cities in California the average cost of a 3-bedroom house is over $500,000?
2. Change in health.
This broad category can actually include many things.
There may have been a death in the family, or someone may have encountered large medical bills. If the homeowner himself started having health problems, not only has he incurred large medical bills, but he's probably also missed work as well.
These unexpected expenses or medical problems eat away at saving very quickly. And if the homeowner has missed work as well, then of course the household does not have as much income to cover their regular bills.
3. Bad financial decisions.
This is yet another very broad category which can include many things. If a homeowner runs up a large amount of credit card debt, he'll find himself quickly losing ground with being able to pay all of the bills each month.
A common problem for the current foreclosure crisis is due to adjustable-rate mortgages which many homeowners agreed to.
When they bought the house at the outset, they got a great deal on interest rates. And that's the trick of it.
The mortgage contract stated that their interest rates would rise over time. The homeowner either did not understand that this would happen, or he did not realize just how high his monthly mortgage payments would go.
So many homeowners found themselves with mortgage payments of about $1000 to start with, but after six months to a year those payments jumped up. For some it may have jumped to $1500, while others may have found themselves facing a $2000 per month mortgage payment.
On top of this, many cities in the US have ridiculously inflated property values and many people have no choice but to accept an adjustable rate mortgage to own a home.
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