Find Out More About The Ins And Outs Of A Foreclosure
What is a foreclosure you ask? Foreclosure is the process the lender will follow to recoup the monies owed by the borrower in the event they do not meet the obligations of the mortgage on the property. The lending company has to comply with the laws of the state of the property.
Some key words are:
Mortgage: Using the money of an investor, bank, or finance company that will pay the seller and will be using the property and structures as the guarantee that the loan will be satisfied.
Borrower: The one who has an obligation to repay the money.
Ownership of property: The mortgage ensures the lender's interest in the property until the note is paid. When paid off, the lender relinquishes their interests in the property and ownership is transferred to the borrower.
Default on loan: When the financing was extended the borrower agreed to repay the money according to a set of guidelines. If they are not met in a timely manner or in accordance with an amended agreement then the borrower is said to be in default on the loan. The lender now has the right to start foreclosure proceedings.
Three reasons that cause the majority of foreclosures; thus, causing the lender to call in the loan. 1. The borrower missed too many payments 2. Borrower did not pay on time 3. The original loan had a variable interest rate. If it went up the payment increased and could not be made.
A borrower must know how to avoid a foreclosure before signing the note. These steps will help. Get a loan with a fixed rate to avoid surprises. It may cost more interest for peace of mind. Do not buy a property so expensive that it takes a first and second mortgage to finance. Avoid the temptation of a home equity line of credit. This only adds to your amount owed. Understand exactly what your obligations are before signing anything.
Can you stop foreclosure? Start making arrangements with the lender as soon as you realize possible trouble with fulfilling your obligations. Try to prevent a foreclosure as best as you can. A foreclosure is stressful and embarrassing not to mention how it ruins your credit history. You may qualify to refinance and lower your monthly payments. Or, you may get a temporary arrangement from the lender in case of a hardship such as illness or loss of job. You may have some other options to avoid it.
Short sale: Maybe you tried to sell your home quickly when you realized trouble was brewing. If you tried unsuccessfully selling your house by listing with an agent or sale by owner, try to work out a short sale agreement. It is the lender's discretion to allow a short sale. In essence they agree to a property sale for less than amount owed to fulfill the mortgage obligations. Understand the forgiveness of the balance of the loan will probably be considered as income by the IRS.
Redemption: Some states allow the borrower to still get procession of the property even after being served a foreclosure notice. If they can provide the monies to satisfy the amount owed and any incurred expenses like interest and foreclosure costs.
Satisfy the Loan: Finding a company that will pay cash for houses, to purchase the property outright and relieve the legal burden of the borrower.
Knowing how to stay out of foreclosure is important even when the economy is good and even more important when the economy is bad.
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