Job loss or change is one of the top 4 most stressful events in an individual’s life. Coupled with another of the top 4 stressful events, which is financial difficulty, it’s easy to understand why the chain of events that may lead to impending foreclosure can throw someone into anxiety, depression and desperation.

The first step to avoiding foreclosure unfortunately takes place at a time when few people consider it: at the time of purchase. By the time you’re reading this Foreclosure Resource Guide, you’re probably way past this point. However, it’s worth discussing for those who may be looking at buying their first home, seeing the current foreclosure rate and economic crisis, and wondering if it’s a good move on their part.

Can you afford that home?

This is the first question you need to ask yourself. Part of the current economic crisis is due to mortgage lenders ignoring debt-to-income (DTI) ratios and making loans to people who simply could not afford to make the payments. What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. To get an idea of what you should be able to afford, try this Ginnie Mae calculator – and then set your sights accordingly.

Adjust your expections – do more with less

Americans tend to live in a lot more space than our European counterparts. Ask yourself if you really need the type of home that’s going to cost you more than you can afford. If you’re buying a 2-bedroom condo and you have one child, take into consideration how much growth your family will sustain in the space you’re purchasing. In spite of what they may tell you when they’re teenagers, it won’t permanently damage your children’s psyche to share a room with a sibling! By the time things really start feeling crowded, you may be able to afford a move up.

Sell it before you buy it

This was the best advice I’ve ever received from a realtor. When you’re looking at property to purchase, view it as a seller, not a buyer. When you want to sell that home in 5, 10 or 15 years – what will it look like to a buyer? I found a home I absolutely loved – until I found out a railroad track ran right behind the wall in the back yard. Still, I loved the home, so I asked all the neighbors how they dealt with the noise of the train. They all assured me they got used to it. Then I stepped into the shoes of a seller and asked myself how hard it would be for me to sell that house. If I was reluctant about buying it because of the railroad tracks, I was pretty sure other potential buyers would be equally reluctant. The realtor and I kept looking.

Understand the loan!

I’m going to repeat that: Understand the loan. Make certain you understand all the terms of the loan and how it works. If you don’t understand loans, keep researching and reading or ASK someone who does! Many of the loans that have been made were made to people who had no understanding that the low payments that looked so attractive at the outset were going to balloon into payments they simply couldn’t afford to make in 2, 3 or 5 years.

The mortgage lenders want your money. They get paid their fees whether or not you can afford to keep your home in 5 years. Don’t take financial advice from them! It’s your responsibility to make sure they provide you with complete and accurate information about the loan you are trying to obtain – and whether or not you can afford it.

Bad things happen to good people

It’s true. People suffer job loss, health problems that impact income and other unforeseen events that may result in loss of financial stability. You can do absolutely everything right and still be facing foreclosure of your home. If you’re careful with your money, have adequate savings and aren’t overextended, you can weather the bad times more readily.