Hundreds of thousands of homeowners are now asking, "How does foreclosure work?" The number of people who are losing their homes hasn't been so high since the Great Depression, and the number of new foreclosure filings continues to rise. There's a lot of information out there regarding the foreclosure process which can be somewhat confusing at times. Read on to find out the real facts, and how you can use this knowledge to help you come out on top of the situation.
Foreclosures don't happen overnight...
The first thing you should do if you've gotten a late notice from your lender is to relax. Foreclosures don't happen overnight. In fact, in some states the process is quite lengthy. Unless the sheriff's sale is tomorrow, you're not going to be out on the street with no time to prepare. You'll receive several late notices before foreclosure proceedings go into effect. Your bank wants you to become current on your loan, and those notices are your opportunity to do so, so don't ignore them.
Of course, not everyone is capable of getting current once they've gotten behind. Financial circumstances vary widely, and many people who are financially secure today find themselves broke the next. If you can't get current, see if your lender will move the missed payments to the end of the mortgage, so you won't have to pay them until the rest of the mortgage is nearly paid off. Most lenders are willing to work out some kind of payment arrangement with you when you first become delinquent. However, if your finances are such that you can't meet your payments at all, the foreclosure process will move to the next phase.
When a payment arrangement with you can't be worked out, lenders take steps to recover the house. Depending on your state, you may go through a judicial or a non-judicial foreclosure. The only real difference between the two is that a judicial foreclosure involves a court order, while the non-judicial version does not. As such, judicial foreclosures tend to take longer than non-judicial ones. The lender has to prove to the judge that you're in default of the mortgage and that they're entitled to repossess the house. In either type of foreclosure, public notice of an impending sale of your house must be made, but not every state requires that you be notified of the sale.
Depending on your state, either a judge or the lender will set a date for the sale of your home. This is usually done at auction to the highest bidder. If no one bids on the house, or if the bids are too low, the bank takes possession of the home. The whole process from the first late notice to the ultimate sale of the house can take anywhere from two months to a year or more, depending on your state. Some states also provide a redemption period after the sale in which you can still pay off the mortgage and reclaim your home.
If you've often wondered, "How does foreclosure work?," you now know the basics. If you're facing the loss of your home yourself, you should definitely look up the foreclosure laws in your state, so you can have an idea of how long you have to stop the process. One important thing to remember is that you own your home, not the bank. Even if you're behind on payments, you still own the home, and can pay it off or sell it at any point, up until the sale and sometimes after. Armed with this knowledge, you can often stop foreclosure and save your credit.
Unfortunately, foreclosures are at an all time high in America. To learn more about how foreclosure works, visit http://www.themoneypuzzle.com.
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