Homeowners must manage their mortgage loan payments and avoid a default whenever possible. If the payments become delinquent, the lender could start a foreclosure and take the property from the borrower. Reviewing the repercussions of foreclosure shows homeowners what they can expect if they fall behind on their home mortgage payments.
What Does Foreclosure Mean?
Foreclosure indicates that the borrower has defaulted on the loan. Typically, borrowers must be at least 90 days delinquent on their mortgage payments before the lender will threaten to foreclose. Once the borrower receives the notice of a possible foreclosure, it is necessary for the borrower to contact their lender and determine what arrangements can be made to prevent the foreclosure.
What Can Buyers Do to Avoid Foreclosure?
First, the borrower can contact the lender and determine if forbearance is possible. Forbearance allows the borrower to stop making mortgage payments for a predetermined amount of time due to economic hardships. The option allows the lender to transfer the overdue payments to the end of the loan and prevent the foreclosure. However, the borrower must discuss the issue with their lender and set up an arrangement.
A modification of the mortgage could give the borrower some relief and lower the payments for a specific amount of time. This allows them to keep their property and pay the lender a lower amount until they get a new job or an increase in wages. The last resort if the lender cannot make these arrangements is to file for bankruptcy.
What Happens to the Property if the Foreclosure Proceeds?
If the foreclosure continues, the lender seizes the property from the homeowner, and the borrower has about 30 days to vacate the property. After the borrower leaves, the lender sets up an auction for selling the property to the highest bidder. The borrower has the opportunity to buy the property during the auction. However, even if the borrower manages to buy the property, the borrower still faces the responsibility of any outstanding balance left over after the purchase. Regardless of who buys the property, the lender can file a lawsuit to collect the remaining balance.
What are the Major Repercussions of Foreclosure?
The major repercussions of foreclosure start with the potential legal action by the lender to collect the remaining balance. Next, the foreclosure can stay on the consumer’s borrower for up to seven years. They cannot secure financing through another lender until three years after the foreclosure. Most home mortgage lenders will also require a larger down payment if they approve the borrower after a foreclosure. There is also the prospect that the borrower could become homeless due to the foreclosure.
Homeowners facing foreclosure have options, and their lenders could help the borrowers avoid legal action or the loss of their home. Understanding the steps of foreclosure helps borrowers learn what to do if they fall behind on their payments or experience a financial hardship. Homeowners who need assistance because of late mortgage payments can contact Dustin Dimisa for help today.