How Does the Home Foreclosure Process Work?
With the economy in a tailspin over the last few years, home foreclosures have increased in numbers tremendously recently. Faced with that economic uncertainty, the numbers don't appear to be dropping too quickly, either. The process of home foreclosure isn't all that difficult to understand, and learning more about it now will benefit you in the future should you or someone you know ever have to go through a foreclosure.
The foreclosure process is started when a borrower (that is, a person who takes out a mortgage loan) defaults on their loan. When you have consistently not made your mortgage payments in a timely manner, you are considered in default on your loan. It generally takes much more than a couple of late payments to be in danger of a foreclosure but if your payments are several months behind, you will most likely receive a notice from your mortgage lender that you are in default and that foreclosure proceedings will be set to begin. There is still time after your initial warning to save the property from being foreclosed upon, but you will have to act quickly.
In many cases, a simple telephone call to your lender and a good faith effort to make payment arrangements may be all it takes to save your home. The worst thing you can do is nothing. No response to your mortgage lender will make them believe that you have no interest in paying your outstanding balance and they will be more likely to speed up the foreclosure process as a result.
If no agreement is made between you as the borrower and the lender, the foreclosure process will move forward. When your home is placed under foreclosed status, you will have lost not only your home but any and all equity you may have built up over time. A foreclosure can leave you homeless and make purchasing a new home in the future incredibly difficult, as all underwriters will look at your credit history when considering you for a loan. When they pull your credit report, they will find - you guessed it - a big foreclosure report. That's a red flag that will stop most loan officers in their tracks. At the very least it will mean that your interest rate will be substantially higher than anyone with average to good credit.
While it is easy to understand the home foreclosure process, what is more important than that is for you to understand how to avoid being put into this predicament in the first place. Before your situation gets out of control, consider looking to refinance your loan for a better interest rate. If you have home equity built up, a cash out refinance can help with immediate bills and leave you with a lower monthly payment that can save you from losing your home altogether.
In the end, it is quite important to know the foreclosure process so that you can know how to avoid it.
