In tough economic times, it’s important to stay on top of your finances. With tightening assets and less money to lend, banks aren’t as willing to approve you for loans, and loans that you are approved for will likely be smaller than in a robust economy. Pay off your bills in a timely fashion, use your checking card instead of credit cards, and generally live within your means.
Having a sizable savings account also helps greatly to help out when money is tight. Sometimes, doing all of the right things still isn’t enough, and a bank owned foreclosure may be in the near future. Instead of dreading such an outcome, take steps to prevent it, and have a plan in case the worst happens.
When you take out a mortgage, you insure that money against the value of your home. It is how most people get large loans taken out for purchasing houses, but what happens when you don’t have enough money to pay back the loan and it defaults? A bank owned foreclosure can kick you out of your own home and put it up for auction. It’s a risk that many people are willing to take to own their own home, and for most people, it’s relatively safe.
However, there is always the chance that you will get laid off from your work, your car breaks down and needs thousands of dollars in repairs, or you don’t have health insurance and find yourself in need of hospitalization. These scenarios happen to people everyday, and then they find themselves facing bank owned foreclosures.
When it’s sold in an auction, if the bank foreclosed home is sold for less than what is left on the loan, then you may end up picking up the tab anyway. In a poor economy, this means that you will have to find somewhere else to live and find a way to pay off the remaining principal, which can be sizable.
Bank owned foreclosures aren’t fun for anybody, and they aren’t even profitable for banks either, who are just looking to cut their losses. Before you go looking to vilify a bank for bank owned foreclosures, remember that consumers are expected to live up to their side of the bargain. It might not be the most desirable outcome for anybody, and it will end up causing a lot of grief and sadness for the home owners in particular, but it is absolutely necessary for banks to be able to continue lending money.