What seems to be the topic of interest today in the media? We can not go a day without hearing something in the news that foreclosures are at an all time high, the market is falling apart. So the big question is what is really happening in today's market?

Let's cover two topics here; what are the real numbers and then how can you avoid foreclosure. Understand that real estate is cyclical and flows with normal ups and downs. So basically, what is happening right now is part of a normal cycle of real estate. Just like crops in a field they produce for 7 years then need to be replanted, real estate follows a 10 year cycle. Foreclosures today are at the same factor as they were through history, 1% of mortgages will enter into foreclosure. For example if there were 50,000 homes available 10 years ago, 500 homes would have faced foreclosure. Today let's say we have 500,000 homes available, then 5,000 would be facing foreclosure, we use this example to explain the simple numbers.

Now that we can take a small breath and relax, the world is not coming to an end and our homes are not going to be worth nothing, let's talk about how to avoid foreclosure.

One of the biggest problems we have seen is that homeowners are in denial. We actually had a client say, "I did not think it was a big deal not paying my mortgage." You guessed correct, he came to us the day before the house went to auction, not much we can do at that point. If you see you are having problems paying your mortgage, life has changed or perhaps a medical bill has caused hardship ask for help, NOW!

If you allow your home to enter into foreclosure you will have to wait up to 4 years to get another mortgage. Last year you could get one right away, today the lending guidelines have been tightened up with most requiring a 4 year good history after a foreclosure or bankruptcy. Following any foreclosure you also have to have clean re-established credit, no 30-60-90-120 day lates of any kind. So as you can see allowing this problem to escalate to foreclosure is worse than saying, I need help.

What options are available when life's challenges are now in front of you?

? Refinance

? 2nd Job

? Forbearance

Refinance; this is a great option if you act when you first encounter trouble. If you have one 30 day late on your mortgage you still have a good chance of making a refinance happen. Of course a refinance will depend on your FICO (credit score), not the family dog; debt to income (how much you make vs. how much you pay in debt) and equity in the home. A refinance may help you lower your payment and even give you a month or two break on a mortgage payment depending on the close of escrow date.

Get a 2nd Job; this is usually a good, quick fix to cash flow problems. Keep in mind the 2nd job does not have to be permanent; usually once you are caught up you can drop the job. However, if the 2nd job works for you and it is creating a smoother cash flow then you can build up your reserves (cash in the bank) so if life happens again it will not cause a panic.

Forbearance; this is after you have been two to three months behind on payments. A lender will usually work with you to keep your home. Forbearance is a payment program that your current lender will establish with you to catch up you debt. Keep in mind if you miss a payment in forbearance the lender will typically move rapidly into the foreclosure process.

The other reason we have seen foreclosures happen is we purchase a home that is more than we can afford. The creative financing that has been available has placed many families into beautiful homes, they did 100% financing and life is looking good. Perhaps they received an interest only loan because the payment was lower. The key to avoiding foreclosure even with a 100% purchase, find a home you can afford. It is better to start small and move up than loose the big dream home because you really could not afford the mortgage and now that interest only payment is done. A good rule of thumb on a purchase, if you can afford the 30 year fully amortized payment then you can afford the home. We do not have to keep up with the Jones' you are a unique individual and you need to just be you, if not no one else can be you!

Real estate is still the best investment you can make...long term. Don't loose your home to foreclosure ask for help and succeed in your investment.

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