3 Mistakes that Put Homeowners in Danger of Foreclosure

There are usually many factors that lead to foreclosure. Foreclosure is not something that happens overnight. The process usually takes a few months or years of bad choices to lead to foreclosure. Therefore, it is essential that you identify these negative financial behaviors before you get to that point. Here are a few mistakes that homeowners make that end up putting them in danger of foreclosure.

1. Too Many Cards

Credit cards are most likely the biggest factor involved in many foreclosure situations. While the credit cards might take a while to build up to foreclosure, they are definitely a factor. The problem with credit cards is that they are so easy to get and they have unbelievably high interest rates. You will pay over 20% interest with most credit cards out there. You can rack up huge balances in one day. Then you are forced to repay the debt with high interest tacked on. If you don't pay the balances, they just keep getting bigger and the late fees start accumulating. This will put a strain on you financially and will lead to problems in other areas.

2. No Insurance

Going through life with no insurance is another common reason that many people have to foreclose on their homes. Having no medical insurance in today's day and age is like playing Russian Roulette with your finances. If you need medical treatment, you will be forced to pay tens of thousands of dollars in many cases. The rising price of health care makes it impossible for a normal person to afford without health insurance.

Besides medical insurance, many people do without auto insurance as well. If you have a wreck, you can owe a significant amount of money. In addition to damaging your car, you could hurt someone else or harm their property. This will result in you paying their medical bills and for any pain and suffering that they have had. This has led to bankruptcy and foreclosure in many situations.

3. Borrowing Too Much

With the glut of mortgage products out there these days it is easy to get in over your head. Many lenders offer 125% loan-to-value mortgages and many similar products. This means that you will be able to borrow more than your home is worth. You will then be stuck in the house, as you can not sell it or refinance unless you pay off more money than the house is worth. Many people have been hurt by taking out second mortgages at high interest rates just to get quick money. Take a good look at why you are borrowing before you do.