If you own a home, foreclosure could strike fear deep into your heart, bringing up scenarios of the bank kicking you out of your home and destroying your credit so you will never be able to buy another home.
Foreclosure is a horrible process. When a homeowner is not able to pay their mortgage, the mortgage lender, to get some of its costs, will assume ownership and tries to sell the house. But very few people are really familiar with how it all happens. Most of what you think you know about the foreclosure process is a myth. We have rounded up the top misconceptions about foreclosure below, in the hope that they will help you breathe a little easier.
Myth Number 1: The bank wants to take your home
The bank you have a mortgage loan with has a legal obligation to do everything within its power to get back the cash still owed to it. But taking your house is their absolute last option. A bank would actually prefer anything over foreclosure because banks are in the business of collecting interest on mortgage loans, not owning houses. And the losses to a bank foreclosing on a home are huge compared with other loss mitigation techniques.
Myth Number 2: You cannot refinance with another mortgage lender
You can definitely try to refinance. This means that you will take out a new home loan to pay off the existing mortgage and to stop foreclosure. These home loan options are usually at higher rates, and you will need to go over the pros and cons. You will need to have a stable income and equity in the house to qualify for a new home loan.
Myth Number 3: When foreclosure starts, you cannot stop it
You can try to stop the foreclosure up to the moment that your house goes up for public auction at the county courthouse steps. This is the final step in the foreclosure process. If you get a hold of the trustee handling the foreclosure and make up all of your back payments prior to that, you can still save your house. But his is a situation in which you need to work with your mortgage lender to figure out your options for repayment.
Myth Number 4: You are kicked out of your house immediately
Missing a couple of monthly mortgage payments or getting word from your mortgage lender is cause for concern, but you shouldn’t jump to the conclusion that you are going to be evicted immediately. Homeowners have the legal right to remain in their house until the foreclosure process is finished. Lenders will sometimes let you stay longer.
Click here to learn why you should live in a home before renovating!
Myth Number 5: Foreclosure will ruin your credit for life
The foreclosure will live on your credit report and affect your score for at least seven years. But you should be able to borrow money again once you have proved that you are creditworthy. You could reestablish good credit two to four years after the foreclosure by regularly paying off a credit card or a high interest car loan.
Do you have a question about foreclosure myths? Call 949-392-6400 to contact the Reed Team today!