Stop Foreclosures & Live a Better Lifestyle

    First off, I want to thank you for taking the time to click on this blog site to read what I have written.  Secondly, if you feel this article has some relevance to the current housing market and for homeowners in general, please send them this link so they can hopefully learn from what I’m about to share.  Finally, I’m not writing this blog to sell anything to anyone, nor will I request that you “opt-in” to something for the purpose of having your email address.  All I’m asking for is your time.  Please take the time to read this blog in it’s entirety and feel free to make comments and provide additional input on the topics covered throughout this article.

     Unfortunately, stopping a foreclosure isn’t as easy as a solid brick wall stopping a baseball that was hit with an aluminum bat by an angry, under paid major league baseball player.  This is a odd analogy and I understand that, however, facing a foreclosure situation can often feel like you’ve just been hit with an aluminum bat by an angry, under paid major league baseball player; and the only thing that is going to stop your velocity, is the solid brick wall right in front of your spinning lace! Let’s face it, the brick wall is going to win this battle each and every time.  So how can homeowners land softly into a golden glove catcher’s mit? In order to express my thoughts on how homeowners can land softly into a golden glove catcher’s mit, we must first unravel some factors that have caused honest, hard working, Americans to lose their “American Dream” of home ownership.

     Why do foreclosures happen in the first place?  I’m going to stretch the truth mildly and state that there are as many explanations as to why foreclosures happen in the first place as there are home owners defaulting on their mortgage loans, but that’s not a valid answer so I am going to take a more general approach and categorize the main reasons why foreclosures seem to be as ubiquitous as evergreen trees in a rainforest.

1. Biting off more than we can chew:                                                                                                                                                                   

     Have you ever stood in front of a cashier at a fast food restaurant and ordered more than your appetite would allow you to eat?  You may have known that you were overindulging and that consuming those extra calories wouldn’t turn out any positive results, but you ordered an extra quarter pounder, and a chocolate milkshake anyways because your eyes were bigger than your stomach.  The end result was paying too much for your meal and leaving the restaurant with an upset stomach.  A foreclosure situation can provide that same upset stomach feeling if you financially bite off more than your budget can chew.  Just because a mortgage lender qualifies someone for a $300,000 home loan and they know they can not afford to make payments on anything above $240,000 they need not waste their time or their realtor’s time looking at houses above their $240,000 price point!   Perhaps you’ve bought groceries at your local grocery store in the past and only had seventy dollars to spend on groceries and you quickly realized that after the cashier scanned your  lobster tails, T-bone steaks, two National Inquirer magazines, two “I Love New York” T-shirts, name brand diapers, and a large bag of Starbucks coffee beans, you quickly realize that you may not have enough money to buy milk, bread, lunch meat and shampoo which were the only things you intended to buy in the first  place.  You may have had to put back the T-shirts and magazines to purchase your four items of intent because you miscalculated sales tax along with your urge to buying on impulse.  Miscalculating a home’s property tax can lead to a foreclosure situation due to back taxes owed and buying on impulse can also lead to a foreclosure situation because you might fail to get a thorough home inspection done to rule out major issues with a home prior to purchasing and after spending thousands of dollars on a new hot water heater, furnace, and roof, you quickly find yourself  in a similar grocery store checkout line situation. Unlike a checkout line at a grocery store, a homeowner can not put anything back on the shelf to pay their mortgage note.  So what’s one way to avoid this scenario? Dave Ramsey, best selling author of books on financial management and the host of a nationally syndicated radio program called “The Dave Ramsey Show” says that a mortgage payment should never exceed 1/3 of a person’s take home pay.  The math on this is quite intuitive; whatever your monthly take home pay is each month, divide that number by three and that number should be your maximum mortgage payment you should be paying each month. 

2. Job Loss:

     By the grace of God, I’ve been fortunate enough to have never been fired from a job or let go from a company due to lack of working capital, downsizing, outsourcing, or any other reason; but I do know that most Americans live pay check to pay check and if their primary source of income is their job and that job is taken from them, their biggest monthly expense which is more than likely their mortgage payment, is not going to be paid on time or in full each month until they are gainfully re-employed.  With massive job cuts, a struggling economy, ( as of August 2010 ) and tax increases, finding another  job of equal or better pay than one’s previous job, then getting notified for an initial interview, making it past the interview process and finally getting immediately hired for a new job could take several months to accomplish.  In all likelihood, by the time re-employment occurs, a notice of default has been mailed to the homeowner and to avoid potential public humiliation, the home owner may end up leaving the home on short notice resulting in a vacant house that could be sitting for months on end before it’s sold again.  In life there are no guarantees and jobs should be treated the same way. If you are living from pay check to check and are fearful that your job may be pulled out from underneath you, start cutting back on your spending - right now.  Make financial sacrifices to save money and place that money into an emergency fund that will help cover your mortgage payments in the event you lose your job.  Another option might be to continue your education to make yourself more marketable which will make it easier for you to find another career if you do encounter a job loss. 

3. Unforeseen medical bills:

     A sudden change in the health of a family member, experiencing a severe accident, a serious illness or anything involving a large medical bill that can not be paid due to lack of insurance coverage may lead to a foreclosure situation as well.  There are health insurance companies that do provide reasonable medical insurance coverage for families, so if you don’t have any medical insurance for whatever reason, I would highly suggest you do some research and ask people you know and trust to see what you can qualify for and get medical insurance coverage because unforeseen medical bills can quickly turn into a high dollar debt if there is no coverage in place to absorb all or a portion of the costs.

4. Poor financial management:

     Is it just me, or have other people grown into adults not really having a clear understanding on how to handle their finances?  Am I the only one that learned how to manage money by first mismanaging money?  Luckily, I made many financial mistakes in my early twenties before I figured out that in order to win with money, one must first understand how to manage money.  I’m going to go out on a brittle limb here and venture to guess that I’m not the only one that grow up in a household where the topic of money management was never discussed.  Why is it that parents teach their children at an early age how to read and write, distinguish from right and wrong, treat people with respect, have faith and believe in God, and to never ever take candy from strangers, but yet they overlook the topic of financial management?  Perhaps it’s because their parents overlooked this topic, or maybe parents figure this topic will be covered in school, or better yet, they may think their children will just learn how to mange money on their own.  How can one write without a writing utensil?  How can one read books without first learning the letters of the alphabet and putting letters together to form words?  Money is no different.  The actor Tom Cruise in the movie Jerry McGuire said, “SHOW ME THE MONEY!” If someone were to knock on your door today and say, “here’s a million dollar check made payable to you, spend it wisely,” How much money would you have tens years later?   Several lottery winners, and athletes making millions and millions of dollars a year have gone broke because they never received any advice on money management so it’s no wonder that the average American working the typical nine to five job making $60,000 a year with a spouse and children can quickly fall into a foreclosure situation due to poor financial management.  I have found that making small changes to my own personal lifestyle has taught me many lessons on financial management because I have overdrawn my checking account more times than I’d like to admit. I figured if the ATM would give me money, that meant I had money in my account not realizing that my electricity bill was about to get deducted from my checking account two days later and my pay check wasn’t going to get deposited for another six days. OUCH!!!  I’m the first to admit that I’m not the best with money but I admire people like my grandparents, Jake & Mary Jane Rabatin – two individuals that never had a mortgage payment on their house, bought brand new cars yet never had a car loan, never complained or fought over money and probably never had a combined income of over $100,000 a year and successfully raised four children along the way.  I have learned to study what successful people do with their money and try to apply it to my own personal life.  Living on less than I make, having no credit card debt, buying used cars with cash rather than with loans, and eating in more often has worked for me and perhaps it could work for others too.  I know people say to right everything down and to spend their money on paper first before actually spending it, but this is something I have been attempting for three years and have never mastered.  I’ve simply identified another reason why Americans often go into foreclosure.   The take away here is that I’m teaching my two children how to win with money right now.  As of August 25, 2010 my two children are 8 and 6.  I’m teaching them simple things like putting away 10% of the money they receive into a savings account.  I tell them that if they learn this at a young age it will become second nature to them like tying their shoe laces.  They don’t quite understand the importance of saving just yet, but maybe by the time the reach the age of 18, they will have fully understood the meaning of financial management and winning with money!

5. I got approved so I’m buying:

     Predatory lending, sub-prime mortgages, adjustable rate mortgages, when does this madness end?  Just because a person can get approved for a mortgage loan doesn’t always mean now is the time to buy.  I’m confident that I could get approved for a brand new 2011 Escalade, but that doesn’t mean that now is my time to buy!  Sure, I’d love to be driving around in a brand new SUV just like a renter would love to be a home owner if they were given the option to borrow money but it goes against my personal beliefs.  My beliefs are to let someone else depreciate my vehicle.  I buy slightly used cars.  I always have and I always will. I’m fine driving my 2003 Ford Expedition with an odometer reading of 204,684 miles thank you.  Having a “buyer beware” attitude can prevent future foreclosure victims from having to go through this painful situation of having the bank steal their home.  Financial advisers will often inform home buyers to get a 15 year fixed mortgage and work on paying that mortgage off ahead of time.  This can save thousands of dollars in interest alone.  The banks of course don’t want you to know this or even want you to pay your house off early.  They are banking on you paying back your borrowed money on their terms. 

     Five key reasons people fall victims to foreclosures have been clearly stated throughout this blog, but we as Americans deserve our freedom and financial independence.  Not having to worry about money can lead to living a healthier lifestyle.  I’m not saying it will lead to a healthier lifestyle, but it can potentially lead to a healthier lifestyle due to reduced stress, sleeping better at night, experiencing less migraine headaches for those that get headaches, and other lifestyle changes for the better that occur with being more financially responsible. 

     As a real estate investor, I have spoken to people facing foreclosure situations and I’ve been able to help a few of them I’ve interacted with.  I wish I could help everyone that contacts me, but that’s just not possible.  I never charge people for offering advice because to me advice is a free service.  For the people I have been able to help avoid foreclosure, I have never asked them to pay me for my services either because they are already experiencing financial turbulence so I will never expect them to pay me anything.  I have the heart of a teacher, the desire to find solutions for people experience a “sticky housing situation” and the thirst for education.  I’m always learning, therefore, I’ll always be teaching.  If you or someone you know is ever getting close to a point where a foreclosure is creeping at their front door, please contact your lender first and foremost and try to discuss some payment arrangements that are more acceptable for the situation at hand. 

     I do have a pre-recorded stop foreclosure hotline that is available 24 hours a day.  I live in Orange County, NY but I’m connected with hundreds of investors nationwide that have the same commitment as I do in terms of stopping foreclosures.  If you would like to listen to my message, then by all means call it at anytime. 

The number is 845-391-0084.  Thanks for reading.

My highest regards,

Gary Rabatin                                                                                                                                                                                                        Founder & President of:                                                                                                                                     www.goldbarfundinggroup.com