REAL ESTATE FORECLOSURE
Foreclosure refers to a legal process whereby a lender takes total control of a borrower’s property, evicting the homeowner, and selling the home when the borrower is not able to make full principal repayment and interests on his or her mortgage as stipulated in the mortgage contract. This legal process attempts to make a buyer make repayment of outstanding mortgage balance after the borrower stops paying their monthly payments. In this process, the lender is forced to sell the property of the delinquent owner home in order to recoup its money. It can be miserable for the homeowners, and also presents an excellent opportunity to purchase a cheap house. In foreclosure situations, RealEstateCake is the best platform to utilize in connecting buyers and sellers.
TYPES OF FORECLOSURES
There are five types of foreclosures and approaches to buying:
1-Pre-foreclosures: a property is said to be in pre-foreclosure after the mortgage lender has notified the borrower that he or she is in default. At this point, if the homeowner can sell the property at this point, they may be able to prevent the proceedings of foreclosure and the negative effect it gives to your credit history and prospects.
2-Short sales: this occurs when the mortgage lender is willing to accept less for the property than what is owed on a mortgage. For this to occur, the borrower does not necessarily need to be in default of the mortgage payments for the lender to agree to a short sale. The borrower will need to show and prove some financial hardship like job loss, which will ultimately lead to a default. The building in question here will worth less than what is actually owed in the mortgage. For this short sale to happen, the lender must agree to it by accepting less than what is owed, and the home must be listed. The property is advertised as a short sale pending approval from the bank
3-Sheriff sale auction: a sheriff sale auction happens after a lender has given notice to the borrower that he or she has defaulted, and will be allowed a grace period to catch up on his or her mortgage payments. Failure to comply with these notifications will move the lender into taking up a sheriff sale auction. This allows the lender the opportunity to get a quick repayment for a defaulting loan. The auctions usually happen on a city’s courthouse steps and managed by local law enforcement authorities. The property will then be auctioned to the highest bidder at a publicly announced venue, date, and time.
4-Bank-owned properties: any property that is not sold at the auctions is reverted back to the bank, and they are tagged as real estate owned properties (REO). They are managed by the REO department of the institution.
5-Government-owned properties: few homes are bought using loans guaranteed by the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). When homes in this category go on foreclosure, they are repossessed by the government and sold by brokers working under the federal agency. After this, a government-owned broker should be contacted to buy the government-owned property.
HOW TO SLOW DOWN THE FORECLOSURE PROCESS :
1-EDUCATE YOURSELF: as a borrower, when you notice that you are nearing foreclosure, the first thing on your mind should be to educate yourself on what is going on. Carefully and calmly read everything that you have received from the lender, with the mortgage itself inclusive. This is important because most initial notices of late payments contain information on options for preventing foreclosure. Other mails that may come subsequently will contain essential notices about the foreclosure process and pending legal actions. Whatever information is contained in these pieces, it is best to stay informed. After this, you should educate yourself on how foreclosure on how the foreclosure is handled in your state or country. While some states are judicial foreclosure states, others are non-judicial. For judicial foreclosure states, the lender has to file a lawsuit against the borrower before moving on with the proceedings, and this is not required for non-judicial foreclosure states. Having a good knowledge about the state you reside in can help you to figure out how much time you have to find a solution.
2-CALL YOUR LENDER: it is wise that you get in contact with your lender as soon as possible. The truth is that foreclosure consumes much time and money, and as such most lenders would rather they work with you to profer a solution that coming to repossess your home. Hence, honest communication and a willingness to work together will go a long way towards helping you get back on steady ground.
Upon calling you lender, there are four main options that he will likely offer you. They are:
- Repayment plan: here, the lender will work out a plan that matches your budget so that you can start making payments. You will then begin working to continue building your payments over a specified period, and also make up for the late payments.
- Refinancing: here, the lender will offer you a new loan with its own interest rate and terms in order for you to cover up for the missed payments and what you owe on the home. This option does not affect your credit negatively and could help lower your monthly repayments.
- Forbearance: forbearance is a situation whereby a mortgage company agrees to suspend your mortgage payments temporarily for a while. These deferred payments will be tacked on to the end of your loan.
- Loan modification: in this case, the terms of your existing loan, such as amount due, interest rate, and length of repayment, will be modified to make your monthly payments more manageable.
3-CONTACT A HUD-APPROVED HOUSING COUNSELOR: after speaking with your lender, but still feel that you need assistance in figuring out what your next step will be, it is recommended that you consult a HUD-approved housing counselor. Platforms like RealEstateCake can help you sell your home in a timely fashion.
4-FILE FOR BANKRUPTCY: filing for bankruptcy will harm your credit, but it is maybe the solution toward delaying foreclosure while canceling or decreasing your debt. Immediately you file for bankruptcy, an automatic stay is imposed on
- your assets, and this stops the collections and temporarily halts the process of foreclosure.
There are two types of bankruptcy. The chapters 7and 13. The kind you choose to file for very much depends on your level of income. They are briefly explained below:
- Filing for chapter 7 bankruptcy wipes out your debt by allowing a trustee appointed by the court to sell off any of your non-exempt property to pay back the creditor.
- Filing for chapter 13 bankruptcy allows you to keep all your property. But, here, you will have to pay back all or a fraction of your debt through a repayment plan.
Any one of the two filings will afford you the time to figure out how to move forward with your home.
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