Foreclosure refers to loss of ownership from a property when the loan is not suitably repaid. There is a chance of one's property being foreclosed if he or she misses on mortgage payments. As a result of this, the lender can take possession of the defaulter's home which was kept as security against the loan.

As a result of the foreclosure, you lose the right to live in your home and you stand to lose all of the equity you held in your home inclusive of the downpayment. The foreclosure also becomes a part of your credit history, severely affecting your chances of getting a mortgage or a loan.

In today's times of providing for a high lifestyle, people find themselves risking their residential property with a mortgage property they cannot afford. The most common reason for foreclosure is personal loss like an illness, a job loss or a failed business venture.

When the source of income is not there, there is bound to be problems while disbursing your mortgage repayment. Another reason is dissolution of marriage which creates financial problems for all involved.

According to housing counselors and financial planners, people should opt for a home buyer education course prior to getting a mortgage. You should reassess your financial need to find out if you are choosing the right type of loan and whether you can afford it.

It is better to save three to six months worth of expenses in case you face unexpected problems like loss of job or illness. A fair bit of credit counseling can help you vastly and save you from the pitfall of taking too much loan and facing the risk of foreclosure.
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