21 Nov Real Estate Tip: What is the Difference Between Foreclosure and Housing Repossession?
Foreclosure and housing repossession are legal processes that both refer to a creditor taking away your property. These processes are alike, but also have significant differences.
Foreclosure refers to the process that your lender needs to follow if you go into default on your home loan and stop making payments. States have different regulations for how long the foreclosure process could last. In some places, a foreclosure could happen within a few months to a year or more.
In a foreclosure, a home is sold as collateral after the homeowners default on their loan. Housing repossession is a more general term for when a lender or loan provider takes ownership of a home because the owners have not paid their monthly bills. This is a consequence of foreclosure. A home is not considered repossessed until the foreclosure becomes final.
The foreclosure process could be long
Homeowners usually have to be at least one hundred twenty days late on their mortgage payments before their bank or mortgage lender starts a foreclosure. It typically takes up to six hundred twenty-five days complete a foreclosure.
Repossession of the property does not usually happen during the foreclosure process.
You do not need to move out when foreclosure proceedings start. You will be given a date on which you must leave the property if the foreclosure process is complete.
What should you do if you’re facing foreclosure?
Many banks are willing to work with homeowners who are missing monthly payments, especially if there is a legitimate financial hardship.
Homeowners who are dangerously close to having their house foreclosed on should not wait long to contact their mortgage lender.
If you get into financial trouble, do not pretend nothing is happening. You need to take action. If you contact your lender and explain what is happening, you will still have a chance of saving your house.
There are also resources to help you find your options. The United States Department of Housing and Urban Development could connect homeowners facing foreclosure with housing counselors who could give you free help. The sooner you contact your mortgage lender, the greater your outcome is likely to be.
Selling your house to avoid foreclosure
If you are struggling to make payments, selling your house to avoid foreclosure is an option. If the home can sell for more than you owe your mortgage lender, you could walk away from the sale with some money in your pocket and no loan debt. It will just be important to move fast to sell your home. The closer you get to home foreclosure, the more difficult the sale could become.
If your home cannot sell for more than you owe on your mortgage, you are looking at a short sale. Short sales are a bit more complex than traditional home sales and will require approval from your lender. It could take a long time to finish the process and it will most likely lower your credit a bit, but not as much as a home foreclosure.
If you think you are headed in the direction of a short sale or foreclosure, contact Shay Realtors here!