In a May 2020 report, there were over 330,000 foreclosure homes in America. If you are facing financial hardships that are preventing you from making good on your mortgage, you’re not alone. Just like the thousands of homeowners who lost their homes, you need to understand what foreclosure means and what you can do about it.
Foreclosure happens when a borrower misses on mortgages and the financial institution wants to get their money back. Since your house or property is their collateral for your loan, they can seize it if you fail to fulfill your obligation to pay them back. When that happens, they can either seize it or sell it on the market to get the money you still owe.
Foreclosure homes don’t happen as soon as you miss your first mortgage payment. However, if you continue to neglect the due dates, you will eventually face foreclosure. Although the process may slightly vary per state, there are 6 typical stages to foreclosure:
Stages of Foreclosure
Defaulting on your Mortgage
Missing the due date for at least one payment already puts you at default. Lenders typically give a grace period of 15 days for you to settle your missed payment. Maybe you just forgot to make the payment? Or maybe you just needed a little more time to wait for your paycheck? Most lenders are lenient and would allow you some time to pay. Beyond the 15 days grace period, you will be charged late fees, which you should settle immediately before the next mortgage is due. Otherwise, you will receive a notice of late payment, reminding you that they have not yet received your due. If you miss your due for the 2nd consecutive month, the lender will send you a demand letter. It’s more serious than a notice of late payment, where you will need to make the payments within 30 days of receiving the letter. Otherwise, your mortgage will default.
Notice of Default
On the 3rd consecutive month that you miss on your mortgage, you will receive a Notice of Default. Your lender will hand over your loan to the foreclosure department. However, most lenders want to avoid taking foreclosure homes, hence the leniency.
During the reinstatement period, you can still reinstate your loan and avoid foreclosure by settling all your unpaid dues. Lenders typically give another 90 days grace period for this.
Notice of Trustee’s Sale for Public Auction
If after the reinstatement period you still fail to pay all your missed mortgage, a Notice of Trustee’s Sale will be recorded in your county. Your lender will also publish general information about your property in the local newspaper for three weeks.
It includes the names of the owners and the address of the house. The purpose is not to shame the borrowers, but to inform the general public that the house will be put up for public auction. The date and place of the auction will also be published in the newspaper, to invite potential buyers to participate in the sale.
Real-Estate Owned Foreclosure Homes
If during the weeks of the public auction the house does not sell, the lender will be the legal owner of the property. They can attempt to sell it through a broker or a Real-Estate Owned asset manager. At this point, your foreclosure home is now “bank-owned”.
So even if you missed your payments and are already facing foreclosure, did you know you can still continue living in your house? There’s no point in evicting you yet, not until the house gets sold either through the public auction or through the REO asset manager.
You will be notified of the house sale and will be given several days to vacate the property. Any items you leave behind past the given days to evacuate can be seized by the sheriff and put in storage. You can still claim all your belongings , but for a fee. So, we suggest you pack your things and graciously leave the property, before you get forcefully evicted from your home.
What are the Consequences of Foreclosure Homes?
Foreclosure homes are the result of unemployment, increasing cost of living necessities, unforeseen emergency expenses, and other financial constraints. It’s not necessarily the result of irresponsible borrowers, as no one obviously wants to get their home repossessed. When you are facing the first stages of foreclosure, you should already be thinking of how to remedy the problem. You cannot avoid the letters that you are getting because the more you neglect your obligation, the more likely your house will be foreclosed.
Defaulting on your mortgage is just like defaulting on any other loan, your credit scores get affected. Know that it’s harder to improve your credit score than it is to ruin it. With your missed payments, it could take months of good credit and repayment history to improve your rating again.
Having a foreclosure house is a whole different story, because it will gravely affect your credit score. It will affect your ability to loan for another home, for a car, or even just to apply for another credit card at a bank. Even if you do get approved for another home or car loan, be ready for sky high interest rates.
Worrying about a foreclosure home can take an emotional toll on you. You can continue stressing over it, or you can take steps to avoid it. There are a few things you can do to save your foreclosure house.
Things You Can Do To Avoid Foreclosure Homes
Now that you know the process of foreclosure and its consequences, you’re probably more stressed about it than you initially were. However, we’re not here to scare your pants off. We’re here to help you understand foreclosure homes so you know the things you can do to avoid it.
Consider Renting Out
First thing you need to do is confirm that your housing situation allows you to rent out a room in your home. This means you need to check with your HOA first before looking for a roommate. Then, think of what you can sacrifice in your home to minimize the fees you need to pay for your mortgage. With the extra income, you might just be able to catch up on your missed dues.
Do you have an extra room that you use as your home office? Maybe you need to sacrifice that. Did the potential roommate request for a private bath inside the room? That’s completely understandable, and if you’re willing to, you might need to sacrifice your master bedroom with an ensuite bath. Remind yourself that a little discomfort in living with a stranger can help you save your home from getting foreclosed.
Look for Money, Everywhere
Desperate times call for desperate measures, right? So if you badly want to save your home, you better go on a treasure hunt in your own house. Have any jewelry lying around, any collector’s items or other cherished possessions that will sell for good cash? Now’s the time to monetize and liquify your other smaller possessions. You need to do it quickly because it can take some waiting to find buyers. But even if you’re in a rush, make sure you know the current value of the items you’re selling, so you don’t get sold short. Don’t be stiff either, if someone negotiates with you discern well if the price they are offering is worth to you at the moment.
Another option is to withdraw funds from your savings accounts, 401k’s, or other investments you might have going on. Pull out the stocks, pull out your investments, cash in on those insurances, and whatever source you can pull money from. Even though it’s less sentimental than letting go of your valuable possessions, there’s also the thought that you’re going to lose the money you put in through your hard work. But it’s a bigger loss to have a foreclosed home, after all those years of paying your mortgage.
If either of the options above apply to you, maybe you’re thinking of borrowing money from a friend or a family member? Take out a cash advance from your card, or from your employer maybe? Yes, those things could work, but you’ll still be in the same predicament in the next months, especially if you’re not anticipating any extra money in the coming weeks.
There’s an Easier Solution
Once your house gets repossessed by the bank, you forfeit all the payments you already made in the past years. The downpayment you made, plus all the memories you made in the house. None of it matters with foreclosed houses.
The best way to avoid foreclosure is to work with Home Seller Heaven. If you’re already thinking of selling your house before the banks put it up for public auction, why not sell it directly to professional buyers? If you do it yourself, you know that it can take more than a few months to find a buyer and finalize all the paperwork. You might even need to make repairs and renovations just to attract the market, which you don’t have the time nor money for. Home Seller Heaven doesn’t care about any of those things.
We buy foreclosure homes for sale, even before they are put up for sale by the lenders. We would rather buy it from the homeowners who are already facing financial struggles to help give them a solution. Avoid ruining your credit score, look to downsize or transfer to a cheaper location, and sell your home directly to Home Seller Heaven. We pay fair prices and we work on the entire process for you, like you’re working with a real estate agent sans the additional fees and commissions.