Foreclosure is what happens when a homeowner is not able to pay for their mortgage. It’s a legal process where, specifically, the owner forfeits all rights to the property. Any outstanding debt must be paid off, otherwise a homeowner may have their home at risk for a foreclosure auction.
If the property is not able to sell at the foreclosure option, the lending institution that powers the mortgage is able to take possession of the home. If you foresee yourself at risk of foreclosure, it may be in your best interest to sell the home early in the foreclosure process. Visit cashofferphoenix.com for more information.
So how does foreclosure occur? The specifics can vary slightly depending on state law, but it can be summed down into a few different steps that you should be aware of before buying a home.
- Missed Payments
- Public Notice
Before we can truly understand foreclosure, a homeowner must know what it’s based on: a mortgage. The core aspect of foreclosure is relationship between a homeowner and a lending institution. The homeowner has already agreed to borrow a set amount with the mortgage agreement, minus the down payment. This deed of trust puts a lien on the purchased property, making the loan a secured loan.
Additionally, when a lienholder loans you money for a home without collateral, it can take you to court for failure to pay as well. Lenders will often sell this debt to collection agencies and simply write off the loss, which is called an unsecured loan.
Due to the nature of the loan, if the homeowner fails to make timely mortgage payments, the home is at risk of foreclosure.
If there’s a good reason, such as personal hardships like unemployment, death in the family, divorce or medical reasons, it may be helpful to talk to the lienholder to see what options there are to avoid the foreclosure process. Foreclosure is a detriment to both the homeowners and the lender, so both parties would like to avoid it.
If for whatever reason, the borrower is not able to pay for mortgage, it may move to the next stage: public notice.
After 3-6 months of missed payments, the lender will report it to the County Recorder’s office, indicating the borrower has defaulted on the mortgage.
Afterward, the borrower enters a grace period known as pre-foreclosure. Depending on the state, it may last from 30 to 120 days. The borrower must pay off the default during this phase to end the foreclosure and avoid eviction and sale.
If that is not possible, it moves on to auction. The lender sets a date for the home to be sold to a foreclosure action, with the borrower notified along the way. At the auction, the home is sold to the highest bidder for cash payment.
The post-foreclosure stage, the lender takes ownership of the property and it becomes bank-owned property. Bank-owned properties are typically sold in a day or two.
To best avoid foreclosure altogether, keep up with your mortgage payments first and foremost. If that ever becomes troubling due to reasons like divorce, unemployment or any other personal hardship, it may be in your best interest to sell the home early. If that’s the case, reach out to phoenixcashdeals.com to see available options.