Owning a home involves lots of financial responsibilities. If a homeowner can no longer make mortgage payments, they face a risk of foreclosure.
The good news is that the homeowner can halt the process at any time by taking the proper actions. Here are a few important facts to know about foreclosure and what it entails.
The homeowner misses mortgage payments
While even a single missing payment can cause problems with the lenders, real issues begin after about three to six months of missed payments. Homeowners should reach out to their lenders as soon as they realize an issue with their finances. In some cases, the lender will work with you to develop a payment plan until you get back on track again.
The lender creates a public notice
If there is no other plan and missed payments continue, the lender will file a public notice stating that the loan is in default. The purpose of this notice is to inform the homeowner of a pending foreclosure, which allows them to take specific actions to stop it from occurring. If the lender does not act, the foreclosure process will continue.
The pre-foreclosure grace period usually ranges between 30 and 120 days. If possible, the homeowner can provide the outstanding payments and stop foreclosure from occurring. They can also participate in a short sale, which entails selling the property for less than the remaining mortgage.
The lender auctions the property
In the event the above actions are not taken, the property a property auction occurs. In this case, a bidder with the highest offer can secure the property. The bank may also choose to buy it back during the auction. Keep in mind that the buyer can still stop the foreclosure by producing the money owed all the way up to the auction.