Tips to avoid trouble

October 30, 2007 

Before reaching the point of default -- or even applying for a loan -- home buyers should keep the following strategies in mind, according to experts:

• Understand a loan fully. If the interest rate changes after a few years, or if you're paying interest only, that can turn your situation upside down in a hurry.

• Know your finances. You'll have to have enough money to make your mortgage payment for the life of the loan, and you shouldn't count on selling if at some point you can't afford it.

• Be careful of refinancing. Doing so takes equity out of your home and doesn't help pay your home's principal. If you refinance, use the money to pay down debts, experts say.

• Have a contingency plan. It's possible you'll lose a job, get divorced or have a family illness that will sap your finances.

• Slow down. Bad financial decisions are made when people think they must act now, rather than taking their time.

• Understand the default process. If you are in default but can work something out with a loan holder because you know the system, it improves your chances of avoiding a foreclosure.

Modesto Bee is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service