Reasons for Foreclosures
There are many typical reasons that foreclosures occur. A foreclosure can occur because of a death, divorces, loss of job, and of course the economy. When some of these things are combined, it is highly likely that the home will be foreclosed on. Whether your home is owned by the bank or another financial institution the foreclosure will be initiated if you miss payments.
Besides the typical reasons for foreclosures, there may be other things involved. Though it is true in part that foreclosures come about due to the mismanagement of personal finances, there are other factors as well. If you know why foreclosures happen you will have the knowledge necessary to avoid foreclosure. If you can avoid foreclosure this may lead to improved management of finances and an improved financial outlook.
The major reason for the many foreclosures occurring is the unraveling and poor local and national economy. If the local and national economy is poor then individuals lose their jobs or their jobs are outsourced to other countries that have a labor market that is cheaper than our own. Of course if this occurs a homeowner will be unable to pay their loans and mortgages.
Also if you have a mortgage with an adjustable rate then the lending institution or bank you are deal in with could raise the rate of your mortgage loan. Because of this an individual will find themselves incapable of paying their mortgage or other monthly bills.
Also, divorce or separation can cause financial problems and make you incapable of paying your mortgage. In a divorce neither party may want to take responsibility for the mortgage payment. It may also be that the payments of one of the individuals may simply not be enough to maintain the mortgage. This means that a default is inevitable.
If your spouse is the main provider in the household and they pass away, this will lead to financial problems as well. Health costs are another contributing factor when it comes to financial difficulties. Medical bills and health insurance can be overwhelming and difficult to handle. Having to pay hefty medical bills and insurance premiums can decrease your ability to pay your mortgage and other household bills.
There are some who live lifestyles that are overly indulgent. There are many times that individuals will live at or outside of their means. Those who are overly indulgent may receive a disruption of their income or an extra expense and this will ultimately lead to financial problems and this will make their mortgage nearly impossible to pay.
Also in the banking industry’s drive to get commissions there are many times that those handling mortgages will encourage the potential home owner to agree to the highest mortgage payment that they can afford. The reasoning for this is that the house will gain value and then the homeowner can refinance at a lower rate. With home values rapidly falling and banks becoming more stringent with lending, refinancing is swiftly becoming a memory for most homeowners. Their rates skyrocket and they can no longer afford their mortgage payment and this ultimately leads to foreclosure.