No homeowner wants their house to be foreclosed. It’s like looking at all your hard work go down the drain! We don’t want to see that and surely as a homeowner, you don’t want this to happen either. So should you worry about foreclosure? Continue reading to see what you need to know about it.
By definition, foreclosure is when a lender (or your bank) takes back your unpaid house or property. This usually happens when the borrower or homeowner defaults on their mortgage payments. The lender will then take possession of their home since they fell behind on payments. When this happens, the property is then put up for sale. The property is put up for sale because the lender needs to take back the money the borrower owed to unpaid mortgages.
What’s the difference between Pre-forclosure and Foreclosure?
When you fall behind your payments, chances are you will fall into one of two categories; pre-foreclosure and foreclosure. What are the differences between the two? Can you save your house if you fall in either of these categories? Let’s discuss this.
Pre-foreclosure happens when you are still behind on your monthly dues, but have received any notice. If you haven’t received any notice from the lender, then you are considered to be in pre-foreclosure. The good thing about being in this category is that you have time to catch up and pay the remainder of your bills. This is also the best time to decide if you want to sell your house, as it has not been considered to be foreclosed yet. This will help you avoid foreclosure and, at the same time, protect your credit score as it will not appear that you are behind your mortgage dues. The best way to sell your house at this point is to have a real estate agent take a closer look at your property. This way, they can assess how much your property is worth and can advise you on what to do next.
When your property is in foreclosure or being foreclosed, it means that you have missed about 3 months worth of payments (or you’re 90 days behind your due payments). However, this may vary in some cases. There are some instances when your lender will foreclose your house within the 90 day mark. A letter should be sent to you as a notification that you have been missing payments for the last 90 days. The letter will also state that you have been warned that they will file a Notice of Default once you fail to pay all of your mortgage dues. If you did receive the Notice of Default, your lender will begin to file your foreclosure. This will give you another 90 days to pay your dues or at least arrange something to pay back your mortgage. A Notice of Trustee will be sent to you once you fail to comply even after given the time to make a settlement. Once you receive this letter, your house will be foreclosed.
Slowing Down Foreclosure
While you cannot avoid foreclosure, especially if you are a bit down on your finances, there are a few things you can do to slow it down or, at least, buy you some time. Here’s how you can do that:
First of all, you need to arm yourself with proper foreclosure education. This means you have to study what foreclosure is all about. This will give you the advantage you need in order to avoid any sticky situations. Don’t panic! Instead, take a deep breath and know what is going on. Read all the letters you have received from your lender and if you have to read about your mortgage all over again, do it. Make sure to keep all the receipts of your payments, as you might have to backtrack everything. Anything that is important that you can use as documents, keep them. Read them and study what strategy you must take in order to avoid foreclosure. It is always important that you are aware of what is written in your letters and what it is you are looking at.
It is also important that you know the laws regarding foreclosure within your state. In some states, judicial foreclosure is applied. This means that your lender needs to file a lawsuit against you before they can take your house. However, this is not always the case, that is why it is important that you know these laws so you can arm yourself with information and take the next best step to avoid foreclosure.
Inform your lender as soon as you can. Keep in mind that foreclosure is being done within a time-frame. Lenders will be much happier if you work with them and let them know your plans to keep your property. Being honest about your current financial situation is important and telling them about your case could help you out. If this is the case, your lender can offer you solutions. They can help you through refinancing, repayment plans, forbearance or loan modification. All of these things can help you out, but this may also mean double the pay when compared to your previous mortgage payment and a longer payment period. You can also contact the HUD which is an approved housing counselor to help you with your situation.
An HUD-Approved housing counselor is a federal-funded agency, or agencies, that helps those people who are struggling with their house payments. They offer people affordable repayment options that help them get back on track with their payments. Once you have contacted them, they will look into your case and will create a plan to help you find the best options and solutions. However, keep in mind that not all agencies that offer this option are the same. Some could be scamming people for money, so always make sure that the ones you contacted are government approved.
You can also file for bankruptcy, if worse comes to worse. This way, your lender cannot file for foreclosure once you have filed ahead. However, the approval for bankruptcy will also depend on what you have filed and how much you earn. Regardless, it’s a good way to buy you some time in order to avoid foreclosure.
Lastly, you can choose to have short sale. A short sale is only done when you feel like you really can’t catch up on any of payments you owe. However, you must also ask your lender’s permission to do this. This is because it will be the lender who will agree to sell the house for less than its actual value. They are also the ones in charge of what offer to accept.
So Should You Worry About Foreclosure?
Truth is, foreclosure is not exclusive to certain people. Even rich people get foreclosed sometimes, it’s not an easily avoidable thing. However, there is no need to worry too much because there are steps you can take to avoid getting foreclosed. However, it would be best if you can keep up with mortgage dues. Less worries mean less stress. Make sure to pay your dues whenever you can so you can avoid being in this sort of predicament. Sounds like a good plan to me!
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