There are a lot of questions out there of what a foreclosure really is and how people get to the point of foreclosure. I will put it as simple as I can. A foreclosure is when a person buys a home and uses a lender to lend them the money to buy the home. The lender uses this home as their security interest but when the person cannot repay the mortgage payments that is when the lender has the right to proceed toward foreclosure. The lender will publicize the home in local newspapers and websites to alert the public of a live auction of this property at the courthouse stating date and time or the lender will hire a real estate company to try and sell it. Once the house is sold the lender can then recover their investment.....BUT......what happens if the house does not sell or is sold at a lower price than what is needed for the bank to cover their investment? A deficiency judgment may be pursued against you and by having a foreclosure and judgment on your credit report will hinder your chances of buying a home in the future. This can be devastating to anyone, so if you can do all that you can to avoid it, please do.
If your in the market to purchase a bank owned foreclosed property, give me a call if you are interested.
Lets look at ways to avoid a foreclosure. First of all you need to decide if a foreclosure is the way to go, will this actually help your financial situation? If you recently lost your job, this may be considered temporary until you find another job but if you have been out of work for quite some time and your financial situation has mounted to a point where it would be impossible to catch up then you will need to decide if foreclosure would be the best way to go.
Begin by contacting a credit counselor who can give you professional advice and help with debt problems. Here is a list of some that you could use: www.MoneyManagement.org , www.CareOneCredit.com , www.CreditSolutions.com . These counselors can negotiate for lower interest payments and repayments to avoid foreclosure. They will assess your current financial obligations and income to create a plan to help you with your credit and debt problems for now and in the future.
If you do not want to contact a counselor, then contact your lender directly and ask for the Loss Mitigation Department and inquire about lowering your monthly payments for a few months until you are financially stable again. It is in the best interest of the lender not to go into foreclosure and if you can come up with a financial plan that would benefit both you and the lender, they will be more sympathetic to the situation. You may also find out if you can renegotiate your currently loan options to an interest rate lower than when you bought the house, this would make a difference in your monthly payment. If you have had the home for a few years, you may also be able to have it appraised and have the PMI insurance taken off which would reduce your payment by $50 - $100 or more. Do not forget to shop around to other lenders for the best interest rate for refinancing.
One last resort is to hire an agent to sell your home as soon as possible. You will need to sell it fast and at a price you may not like but its better than going into foreclosure and having this on your credit report along with any judgments. Good luck and if you have any comments or feedback on something I may have missed, I welcome your suggestions.
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