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Prevent Foreclosure from the Start


Everyone feels a sense of pride after they have made their purchase of a home. For a while, you may not have the desire to go out much because you want to bask in your moment of achievement. Since you close on your home, you will find that more credit companies want to extend credit to you. Homes usually go up in value, so credit companies feel that you are collateral-worthy. It is easy to get overextended if you are not budget-conscious.

When you applied for a mortgage, most loan officers will advise you not to buy anything with a credit card and do not ask for new credit while a mortgage decision is pending with a lender. The mortgage company uses all current minimum payments of your debts versus your income to determine a mortgage on your behalf. If you got new credits, it would throw off their figures and change your debt profile. 

The lender uses the debt profile versus your income to determine the likelihood of the lender getting paid back for the loan. When your debt exceeds the percentage value, the mortgage lender decides whether it is comfortable for you to repay your debts based on your income. The lender loan denies your loan when they determine that your income does not support all your debts. Thus, approval for a mortgage means that if you maintain your debt where it is and your income as it is, you will pay your mortgage comfortably. However, after closing on your home, it is tempting to run your credit up.

The danger of foreclosure starts to presents itself the further you move from the mortgage lender's formula. You walk away from the lender's method when you run your credit cards higher or apply for new credit. Some people buy new furniture to go with the new house, get a new car to go with the house, go on a vacation in that you usually run up your credit cards on vacation, and so on. In the meantime, your income stays the same, and now you are overwhelmed; it is even worse if you lose your income for a short time associated with a job change or health reasons. Credit cards are for convenience but not to be used as income.

To prevent foreclosure, you should base all your actions on a running budget. "Time is money, and money is time," they say. To buy that furniture, that new car, and or vacation, you may need to get a part-time job to get that extra income to supplement the payment of those credits. If you do not want to get a part-time job, then you do not exceed your debts beyond the position where your mortgage was approved. It would help if you only bought when a debt within your mortgage lender's formula is paid off. 

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