Credit Counseling Can Help Prevent Foreclosure

The purposes of credit counseling include helping you evaluate your current financial situation, learning about the contributing causes of financial hardship and the ultimate goal, debt relief. Many recent homebuyers that chose adjustable rate mortgages (ARMs) did so because they planned on refinancing in a couple of years when their credit score was better. The trouble is, few of these homeowners actually saw credit score increases because their massive credit card debt remained high.

Now that these loans are over 2 years old, the payments are going up. In some cases, mortgage payments have nearly doubled. Distressed homeowners are trying in vain to refinance in order to lower their payment, yet they cannot get approved for a favorable fixed-rate mortgage because of their high credit card debt and low credit score.

Beginning in March 2007, underwriting guidelines on subprime loans became more stringent. What this means is that it will be even harder to refinance your existing ARM. If your payments have gone up, then you may wish to consider addressing the other problem, which is credit card debt. Reducing your credit card minimum payments can ease up your budget to allow for more money available for your mortgage payments. Better yet, as your debts are eliminated, you can improve your credit score over time. This will allow for improved refinancing opportunities in the future.

If you are struggling to make your mortgage payments, consider meeting with a credit counselor today. Make sure that the agency is reputable. Also, you should seek help from agencies that offer housing counseling in addition to credit counseling. There may be several mortgage delinquency and loss mitigation options that you can discuss in addition to credit counseling.

Make up your mind that you are ready to eliminate your credit card debt and avoid foreclosure. Your counselor can help you accomplish those goals.

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