The Number of Foreclosures Rises Again - So Buy Within Your Means

The number of U.S. foreclosures has risen again, for the month of March and also for the entire first quarter of 2009. So today, we will once more offer advice on buying within your financial means, to prevent this sort of thing from happening to you.

The first-quarter results are in for 2009, and the numbers are downright scary. The total number of foreclosure filings (meaning the paperwork process has begun) was higher in Q1 2009 than any other quarter on record -- more than 800,000 filings in all.

The states hit worst by these foreclosure numbers are the ones you've been hearing about all along, plus one "newcomer" -- Florida, Nevada, California, Arizona and Illinois.

And we have not seen the last of this foreclosure crisis yet, not by a long shot. Home loan modifications will offset some of this pain in the future. But as of right now, the banks cannot (or will not) modify fast enough.

It's unfortunate. It's disheartening. But in many cases, it could have been avoided. Many of these foreclosure cases are the result of home buyers who knowingly bit off more than they could chew. It happens all the time, and it typically results in either a quick turnaround sale or a home foreclosure process.

Sure, there are certain scenarios where the home buyers did everything right, bought within their budget, and merely suffered some kind of financial disaster afterward. But these scenarios represent the majority. Most foreclosure victims had some idea they were getting in over their head with the mortgage loan -- but they did it anyway.

Just the other day, I was watching one of those house-hunting shows on HGTV. It was a young couple buying their first home. At the beginning of the show, they were adamant about buying within their budget. In their words, they said they didn't want to be "house poor" (spending so much on a home that they could barely make ends meet).

You can probably predict the rest. By the end of the show, they had purchased a home that was about $10,000 above their budget cap. "I just have to get this house," the woman said. She got what she wanted, and now she's house poor. She even had to take a second job to help with the mortgage payments. Talk about a foreclosure waiting to happen!

Biggest Mistake: Letting the Lender Set Your Budget

You are the only person who can determine what you can afford, in terms of a mortgage loan. Some home buyers think this is the lender's job, but this is a backward way of thinking. A mortgage lender can only tell you the amount they'll approve you for -- they cannot tell you if that amount is actually affordable for you.

So before you even start house hunting or getting quotes from lenders, determine your own home buying budget. And stick to it! Here are some resources to help you get started:

• Buy Within Your Means to Avoid Foreclosure
• How Much Mortgage Can I Afford?

Remember, it's up to you to set your housing budget. And it's critical to do this early on in the process. It's very possible for a lender to approve you for a loan that's simply too big for you -- it happens all the time. Mortgage companies can sell the loans they make into the secondary mortgage market, which essentially takes the loan off their books entirely. To a certain extent, this removes the "burden" of making sensible loans.

So don't count on a lender to be on your side. You are your only advocate during the home buying process. And ultimately, you are responsible for your own actions, and the consequences of those actions.

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