What is Foreclosure Prevention? - How It Works

As the living expenses rise, some homeowners are foregoing meals or deferring bill payments in order to stay up with mortgage payments and save their homes. If you find yourself in this scenario, foreclosure can be the very near future. However, the situation is not entirely hopeless. Read this article to know how you can protect your home.

What is Foreclosure?

Foreclosure is the legal process by which a mortgage holder takes possession of a property when the owner fails to make payments on the debt. The mortgage holder is the firm to whom you make your mortgage payments. When terms are not met, the mortgage goes into default. Missing payments, having inadequate insurance, or failing to pay your property taxes could all fall under this category.

When Does The Foreclosure Process Begin?

Borrowers who fall behind on their mortgage payments typically go through a number of procedures before facing foreclosure. Foreclosure occurs when you break your repayment agreement with your lender and fail to negotiate alternative repayment arrangements, such as a loan modification.

 

The promissory note you signed at closing as a condition of taking out a mortgage contains details on the repayment agreements. These agreements may differ depending on the lender and the jurisdiction. Refer to your mortgage agreement for specific rules that govern your mortgage.

What is Foreclosure

How Can You Prevent a Foreclosure?

Gather Your Documents

The first thing you should do before missing a mortgage payment or falling behind on your installments is to get organized. Set up a file for your home’s records and place important documents in it. Include copies of your loan documentation, such as the mortgage (or deed of trust) and the promissory note.

Know Your Legal Rights

After gathering your documents, spend some time reading them thoroughly to understand what would happen if you don’t make your payments. Knowing all of these crucial details can help you a lot. Important information will be included in the mortgage (or deed of trust) and the promissory note, such as:

 

  • whether you can reinstate the loan by making up on past-due sums (state law may also allow a right to reinstate) 
  • the monthly late charge amount
  • what extra costs the servicer may levy if you get behind in payments

Analyze Your Finances

You should compile and organize your financial information in addition to the loan documentation. Gather your most recent pay stubs or, if self-employed, a profit and loss statement, bank statements, federal tax return, and supporting documents for any other income you generate, such as social security, rental income, and alimony. You should also calculate your overall monthly income and expenses. Try to reduce your expenditure in order to make your mortgage payments. Any superfluous spending should be closely monitored.

Emails From The Lender

Any default notices or emails you receive from the lender may contain helpful information. They also provide foreclosure avoidance services. Some emails may carry important legal alerts and other information. Therefore, it’s important to respond to your lender’s emails.

Examine Every Option

You may find a lot of beneficial information regarding how to avoid foreclosure by conducting thorough research. Many government organizations, including housing and the legal system, provide information and options.

Contact Your Servicer

Don’t put off seeking assistance until the last minute. If you miss a payment or fear you will miss one, contact your servicer right away to determine if you qualify for a foreclosure alternative. Remember that they do not want the house and will assist you with a new repayment plan and other solutions during difficult financial times.

Learn About The Foreclosure Laws in Your State

State laws and timelines for foreclosure differ. Learn about the foreclosure rules in your state so you can know:
    • How long you have to work out a deal before losing the house to a foreclosure sale.
    • Your legal rights and safeguards throughout the foreclosure procedure.
    • Do some legal study or speak with a local foreclosure lawyer to learn more about your state’s foreclosure laws.

Beware of Recovery Scams

Many people fall victim to scams and lose a lot of money, sometimes even their homes. If someone asks you to sign documents and claims they can stop the foreclosure process quickly, get away from them. Never sign anything unless you understand it in its entirety.

Sell The Property

You can try to sell your property quickly if it’s in a desirable neighbourhood, or you can locate a tenant or roommate to help you with the mortgage payments. When assessing the possible resale value or inquiring about neighbourhood vacancy rates and what you may expect to receive in the monthly rental, contacting a local real estate agent or property management firm would be a smart place to start.

Do I Have to Leave My Home During a Foreclosure?

Typically, you are not required to leave until the foreclosure process is completed, which can take several months or up to a year or more. However, once your house is sold, you must vacate the premises. You may have some time following the selling date to live in the home, although this varies by state.  If you continue to occupy the premises after your legal rights have expired, the homeowner or lender will initiate a formal eviction procedure.

What Impact Will Foreclosure Have on My Credit Score?

According to FICO, foreclosure is a very negative credit event that can reduce your credit score by 100 points or more. Furthermore, it remains on your credit report for seven years. Your credit score will be negatively impacted prior to the foreclosure process because missed payments are at the top of the list of all adverse events.

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The fact that you may lose your house is one of the most distressing events you can have. However, you don’t have to face it alone. Contact Alpha mortgages House Corporation in Surrey BC to get free, expert assistance in avoiding foreclosure. Our experts can guide you on the best financial solutions available. 

 

Feel free to contact us at 6045019837