Five Things You Need to Know about Foreclosure
by on Aug 6, 2013
If you are on the threshold of foreclosure, whether you fear that it is in your future because you have missed a few mortgage payments or you have already received a Notice of the Intent to Foreclose from your lender, the best thing you can do is become informed. When it comes to protecting your rights as a homeowner and making the best decision for you and your family, knowledge is the absolute key. The more you know about foreclosure, the more power you have over your financial future.
Below are five things you should know about foreclosure. For further information about the foreclosure process or to learn more about the options available to you as a homeowner, please contact the real estate experts of Fast Home Help today.
1. You don't necessarily have to wait long after foreclosure to become a homeowner again.
Homeowners who seek an alternative to foreclosure such as a short sale are often able to secure a new mortgage backed by Fannie Mae or Freddie Mac in as little as two years. To qualify for a mortgage insured by the Federal Housing Administration (FHA), former homeowners are technically required to wait at least three years; however, exceptions can be granted depending on the circumstances surrounding the foreclosure.
While foreclosures can wreak havoc on credit scores, those who work diligently to rebuild their credit stand a good chance of becoming homeowners again relatively quickly. In the meanwhile, they should save money toward a down payment - the more substantial the down payment they are able to make, the less risk the lender has to assume, which generally works in their favor.
2. You shouldn't wait to receive a Notice of the Intent to Foreclose before contacting your lender.
Foreclosure is an expensive process that poses headaches for both the homeowner and the lender. Once the process has commenced, however, it is difficult (though far from impossible) to stop. If you are behind in your mortgage payments, but you have reasonable expectations of being able to emerge from your underwater state in the foreseeable future, the best step you can take is to contact your lender and try to work something out. If you and your lender can arrive at a feasible, mutually agreeable foreclosure avoidance plan, you'll both ultimately benefit.
If you have already received a Notice of the Intent to Foreclose, it's never too late to communicate with your lender. While your options may be fewer, they will eventually dwindle down to zero if you avoid communication altogether.
3. The effect of foreclosure on your credit report becomes less with time.
Many people believe that, because a foreclosure can remain on their credit reports for up to ten years, they will be penalized until it disappears. For most people, however, this is not the case. Over time, your positive behavior as a consumer will begin to tip the scales in your favor, with your foreclosure having less and less of an impact on how are perceived by lenders. Depending on how reliably you repay your post-foreclosure debts, potential lenders may view your foreclosure as a minor blemish rather than a major black mark within three to five years. This will make it easier for you to secure car loans, credit cards, and - of course - a mortgage.
4. Foreclosure laws and programs vary by state.
Many people do not realize that foreclosure laws vary considerably by state, even down to such details as the length of the foreclosure process. In New York, for instance, the foreclosure process spans 445 days, while in Texas, it spans a mere 27. It is essential that you familiarize yourself with the foreclosure laws governing your state, and that in educating yourself, you do not confuse the laws of another state with the laws of your own.
Just as laws vary by state, so do the programs available to assist homeowners facing foreclosure. While the federal government offers some assistance to all American homeowners, many states also have programs of their own, including:
- Alabama: http://www.hardesthitalabama.com/
- Arizona: https://www.savemyhomeaz.gov/
- California: https://www.keepyourhomecalifornia.org/
- Florida: https://www.flhardesthithelp.org/
- Georgia: http://www.dca.state.ga.us/housing/homeownership/programs/hardesthitfund.asp
- Illinois: http://www.ihda.org/
- Indiana: http://www.877gethope.org/
- Kentucky: http://www.kyhousing.org/
- Michigan: http://www.michigan.gov/mshda/buyers/save_the_dream/helping+hardest+hit+homeowners+-+contact+your+mortgage+servicer+for+assistance
- Mississippi: http://www.mshomecorp.com/firstpage.htm
- Nevada: http://www.nahac.org/
- New Jersey: http://www.state.nj.us/dca/hmfa/home/foreclosure/homekeepers.html
- North Carolina: http://www.ncforeclosureprevention.gov/
- Ohio: http://www.savethedream.ohio.gov/
- Oregon: http://www.oregonhomeownerhelp.org/
- Rhode Island: http://www.hhfri.org/
- South Carolina: http://www.scmortgagehelp.com/
- Tennessee: http://www.thda.org/
- Washington D.C.: http://www.dchfa.org/
You may also be able to participate in the Cash for Keys program, in which your lender essentially pays you to leave your home (in an agreed-upon condition) in exchange for a lump sum of cash (usually between $2,000 and $30,000). This allows the lender to avoid the cost and hassles of foreclosing on your home.
5. Some lenders accept a Deed in Lieu of Foreclosure.
While many lenders will try to convince you that they have your best interests at heart, you may feel at times as though they are actually your worst enemies. The truth actually lies somewhere in between. Banks and other lenders are in the business of making money; they will take whatever action is necessary to improve their bottom lines. Whether this action ultimately helps or hurts the individual homeowner is more or less coincidental.
Many lenders find it in their best financial interests to offer homeowners a Deed in Lieu of Foreclosure. Such an agreement generally involves the homeowner forfeiting the deed on his or her home to the lender, who in exchange does not pursue foreclosure and absolves the homeowner of any subsequent liability with respect to the home. While such an offer does allow a homeowner to avoid foreclosure and its negative effects on his or her credit report, it also leaves the homeowner more or less empty handed. In most cases, a short sale is preferable; however, many homeowners are just as pleased to walk away from their situations unscathed.
The real estate professionals of Fast Home Help can provide you with honest, unbiased counsel as you consider your options in the face of foreclosure. Please feel free to learn more about your property by requesting a free, no-obligation Property Privacy Audit™ today.