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Explaining How Does a Foreclosure Work

Aug 23, 2008
The real estate market crisis has caused homeowners fall behind on their mortgage payments. If this is you, you may want to prepare yourself for what will come. This article will cover what you need to know about this process.

Foreclosure is usually not enforced as soon as the first mortgage payment is missed. After three mortgage payments are missed, however, reminders, fees and penalties are sent to the homeowner by the lender. These are usually friendly in nature.

Keep in mind that different lenders operate differently. Some lenders give homeowners more time while others are faster at filing for foreclosure. Since the market is extremely bad right now, you can additionally expect a little more time before they get around to you, since they'll be so busy foreclosing on others! However, it is very rare to go more than six months without paying your mortgage bill before foreclosure papers have been filed.

How does a foreclosure work? The process is not definitive from one place to the next. Instead, it differs between states and municipalities. Regardless of location however, the foreclosure process usually begins with the Notice of Default, moves on to the Notice of Foreclosure, and finally results in the Notice of Trustee's Sale.

The real estate investor and local newspapers usually print three notices, starting with the Notice of Default. That will almost always tip off the real estate investors and start a flood of calls where they offer you much less money for it than your home is actually worth. If you do have some equity in your home (but not too much) then this option may be just what you need to save your credit record and start a new life fresh.

Up until the time of the Trustee's Sale, a home owner has a chance to pay off his mortgage to keep his home. Unfortunately, in a lot of cases they simply cannot afford to. At that point the home is put up for auction, which is when people looking to flip houses and real estate investors come out of the woodwork. The investors and flippers understand that these homes are not in good condition, i.e. low priced. They make the repairs and in turn make a profit.

Homeowners who have defaulted into foreclosure are evicted following the auctioning of their home. In some instances, depending on the location, the mortgage lender can bill the defaulted homeowner for the difference if the defaulted balance exceeds the final auction price of the home.

Imagine being kicked out of your home and told you must pay back thousands and thousands of dollars in repairs! This happens more often than you might think. This is called the deficiency judgment. So, sometimes, even when the house is foreclosed, the homeowner is not walking away from the debt.

Currently in the United States, foreclosure rates are alarmingly high and pose a very real problem. It is not only an expensive process, but also one that wreaks havoc on your credit and overall financial well-being for years down the road. In most states, homeowners that have suffered a foreclosure won't be able to borrow money again for any reason for the entire following ten years.
About the Author
If you yourself, or someone you care about is involved with a foreclosure, you would be well advised to learn specifically how does a foreclosure work in your city and state at the Foreclosures Help website.
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