What is a foreclosure and what is the process that it goes through? Is it different from an eviction?
A foreclosure basically means a process that the bank goes through to attempt to collect the money owed to them on a house. For example, you bought a house a couple of years ago for one hundred thousand dollars.
You did not have enough money to buy on your own, so you had to get a loan from a bank. The bank lends you the money to buy the home and sets up a monthly payment that you have to make every month to them.
At the beginning, the payments you are making monthly are mostly just the interest that you owe. Not much of the money you pay is applied to the principal amount.
As the years go on, more of your payment will go towards the principal amount and less towards the interest amount. The mortgage payment you and the bank decide on is one thousand dollars per month.
You both agree and sign a contract. You are now in debt to the bank with your house.
A little while later, you lose your job and are unable to pay the mortgage for that month. A late notice is sent by the bank reminding you about it.
You still have not found a job and so continue to miss more payments as the months go by. The bank will then try to get a hold of you to resolve the situation.
If this does not happen, then the bank will demand you pay everything in full with back interest. By this time, it will cost you a lot of money to reinstate the loan because the bank will insist you pay them a lot more than you used to.
If you do not pay them anything, they will start the foreclosure process. This process could take anywhere from forty-five days to six or more months depending on how aggressively the bank pursues the case.
They will go to the court system to start the process and begin printing legal notices in the local paper. You (the lender) may still not be able to pay the bank back anything and so there are no settlements over the loan.
The waiting periods expire and the court issues an order which allows the bank to take claim on your house. Since the bank does not want your house, they hold an auction to sell it off.
The bank is not interested in owning your house; they are only interested in being paid the money that they lent you along with all the interest that the loan acquired during that time. So they will try to sell off the house as quickly as they can.
During this whole process, you are not forced out of your home and you can continue to live in it. Even after the foreclosure process is complete, they cannot kick you out.
When the bank finds a buyer for your house, the ownership is transferred from you to the buyer and you become a tenant in the house. You and the buyer might make arrangements for you to continue to live there if you pay rent but more often than not, they will start the eviction.
They send a legal notice for you to leave the premise within a certain time frame. If you do not leave, they must then take it to the court where a judge will rule if you need to be kicked out or not.
If you still do not leave, then a sheriff will come and physically remove you from the house putting all of your things in storage. To get your things back, you must pay for storage rental fees.
This is a long and difficult process for both you and the bank. How can you avoid it?
Make sure that you make your mortgage payments on time. Do not buy a house that is too expensive for you to afford and one that has manageable payments every month.
Sometimes you cannot control factors such as losing your job and that makes owning a house really hard. But if you work hard and are smart about your financial decisions, you can keep the house you want to live in.
About the author of this article:
Tom Selwick has worked as a loan officer for the last 14 years and written hundreds of articles about mortgage loans. He recommends to get informed about FHA loan Requirements to make better decisions when searching for a mortgage loan.
Contact Info:
Tom Selwick
TomSelwick09@gmail.com
(http://www.fhalendingrequirements.com)
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