What is Foreclosure?
Foreclosure occurs when a homeowner is unable to make the mortgage interest and principal payments on the home for a period of time. If mortgage payments are not made, the lender has the right to seize the property, according to the terms stipulated in the mortgage contract. Foreclosure usually results in sale of the property with proceeds going towards the mortgage debt.
When you see homes for sale that are “foreclosure” properties, these are homes that have been seized by lenders, and subsequently put on the market for resale.
Some creditors will work with the borrower to avoid foreclosure, i.e. adjusting the repayment schedule so that the owner is able to keep the home.
HUD (US Department of Housing and Urban Development) provides information on how to prevent foreclosure. Check out these links: http://www.hud.gov/foreclosure/index.cfm
Here Are a Few Tips to Remember About Forclosure:
- If you think you are headed towards foreclosure, talk to your lender about possible arrangements to avoid it. You may be able to refinance, or find other loan options to get current. Note that a foreclosure does go on your credit report.
- Remember that difficulty making mortgage payments due to hurricanes or other disasters may mean there are special government programs to assist, so that you may avoid foreclosure on your home.
- Don’t automatically use a “we sell homes fast” service, which will bring you below market value for your home. If your home is in good condition, you may be able to get closer to fair market value by using a realtor, and still avoid foreclosure.
- Be wary of “investor services” who offer to sell your home in a week or two, picking up all closing costs, and without the realtor commission. They aren’t doing you any favors – this usually is no different than the “we sell homes fast” guys.
- Be wary of “pre-approved credit” plans. You may get temporary cash to help with back mortgage payments, but in the long-run, you’ve just increased your debt.
- If you search on the Internet under “foreclosure” or “foreclosure counseling” you will see a variety of services. While there are some legitimate counseling services, specialty realtors, and real estate investors out there, any person or firm who offers to counsel you on foreclosure AND sell your home fast should be checked out thoroughly. Be sure to contact the Better Business Bureau to see if there are any complaints against the firm, and think through all your options.
- Do NOT sign anything you don’t understand!
For additional resources on foreclosure, check out these websites:
- http://www.mortgagebankers.org/ - The Mortgage Banker’s Association (providing numerous links on state-specific resources, articles on predatory lending, and links to information on hurricane and disaster-related foreclosure forbearance).
Now, feel free to check out other great links on mortgages.