More homeowners across the country are struggling to make the monthly payments due on their mortgages, and with sales at an all-time low, foreclosures are flooding the market in record numbers. If you are one of the many with questions and anxiety concerning foreclosure, read up to how to get the most out of a bad situation.
How Does Foreclosure Work?
Foreclosure is a process by which banks and lenders take back the property you are purchasing because you fail to make the mortgage payments. Learn what laws apply to you, since you may be able to get out of the process in time, even up until the auction date. If you have missed three mortgage payments or less, you can usually work with your lender to come up with a solution.
Those who know that they will not be able to keep up the mortgage payments can try to sell their homes. Unfortunately, it is a poor time to put your house on the market, but the right real estate agent, keeping your home in good condition and an aggressive marketing campaign could bring interested buyers. Sell first before buying a smaller, less expensive home.
The Downside To Foreclosures
Walkaways, or people who just give up on the mortgage entirely, face the most trouble. Others who try unsuccessfully to pay off their loan can face the same fate: bad credit. This does not seem like it would be that big of a deal, except that ruined credit could affect everything, from a new job to buying any kind of large purchase, for seven years. Not only that, but foreclosure has compounded legal and tax consequences as well that will last well into the future.
How To Avoid Foreclosing Your Home
Even though it may seem like the only out, foreclosing is not the best solution for anyone. Knowing how, or at least attempting to get out of foreclosure, will save you a ruined credit history and the inability to re-enter the housing market later down the line.
Being trapped in a financial bind does not mean that foreclosure is the answer. Anticipate when you think you may need help, such as if you lose your job or know that your loan is about to adjust. Predetermining when your mortgage payments will skyrocket allows you to present your lender with information about your income that could help modify your loan.
Contrary to what you may think, your mortgage lender does not want to take away your house. Lenders do not manage real estate -- they work with making sure you stay in your home. Chances are that if you consult them first, they will help you develop a deal. Another option is a short sale, where the house sells for less than the mortgage. The good news is that a default notice does not mean the end. Research all your possible options, reread your loan documents, talk to your lender and you may be able to avoid foreclosure all together.
