The Obama administration and Federal Housing Administration are taking steps to help homeowners avoid foreclosure by offering loans to unemployed borrowers facing foreclosure. But should unemployed homeowners really take out more debt to avoid foreclosure? Here a few things you should consider before taking out a loan to avoid foreclosure:
- Do you have other debts besides your mortgage? Oftentimes, debtors facing foreclosure are also facing credit card debt, car loan debt, tax debt and/or other types of debts that may be eating up their limited income. Taking out another loan to avoid foreclosure will be an additional debt added to your obligations. Do you really want to create another bill?
- Will you be able to earn enough money to repay the foreclosure prevention loan and your other financial obligations once you are employed again? Remember, once you take out the foreclosure prevention loan you will need to pay your mortgage and the loan once you find employment. Many unemployed homeowners are finding it difficult to secure work with wages that are comparable to what they earned during the boom. Do the math and find out how much you need to earn to repay this loan and your existing financial obligations.
- Even if you're able to earn enough money to repay the foreclosure prevention loan once you find employment, will the loan be enough to cover all of your bills while still unemployed? Even if you are receiving unemployment insurance benefits, you need to calculate whether or not the foreclosure prevention loan will be enough to cover your other expenses if you are close to the end of your term for receiving unemployment benefits.