Facing Foreclosure? 10 Things You Should Know

FORECLOSURE. It’s a big, scary word for all of us, but for many Americans, it’s more than just a worst-case scenario. It’s a reality.

People go into foreclose for all kinds of reasons. Layoffs, excessive debt, medical conditions, divorce, and a job transferring to another state are all situations that can lead to foreclosure. The good news is that foreclosures appear to be happening less frequently than they used to. According to Forbes, 2014 saw the lowest number of foreclosures in America since 2006. But more than a million Americans still foreclosed on their homes last year.

So what’s to be done? Whether you’re facing foreclosure on your current home or you’re nervous about the future, there are many things you can do to avoid foreclosure entirely or take it by the horns if it comes knocking at your door. Here are ten valuable foreclosure facts that you need to know:

  • Your mortgage lender does not want to take your house away—Frankly, your lender isn’t eager to foreclose on any home. Foreclosing on a property means your lender will be losing a lot of money and be stuck with a piece of real estate they will have to manage. It’s by far in your lender’s interest to help you avoid foreclosure or cut a deal, so you don’t have to leave your home. So remember that lenders really do want to help you out.
  • Difficulty with finances doesn’t have to lead to the foreclosure—Even if you’ve lost your job, gone through a rough divorce, or piled up more debt than you can handle, that doesn’t mean you’re doomed to foreclose on your home. Take some time to evaluate your situation. Talk to your lender about refinancing. Consider taking on freelance work or a roommate. Before you throw in the towel, realize that there are options to get your feet back underneath you.
  • Understanding your mortgage can help you avoid foreclosure—Even if you don’t see yourself ever going through a foreclosure, review your mortgage paperwork carefully. Many unfortunate homeowners who end up in foreclosure say they were unaware of crucial information about their mortgage. So no matter how tedious it might be, read all your loan documents and ask your lender any questions you might have. Consulting with an attorney isn’t a bad idea either.
  • Foreclosure is a process, not a singular event—Most foreclosures take anywhere from two to twelve months after your first missed mortgage payment, and you will receive many notices and letters along the way. The good news is that this long process gives you plenty of time to take action and come up with an alternative solution. A foreclosure notice certainly doesn’t mean it’s all over.
  • The foreclosure process has four phases—Your rights and options as a homeowner will change depending on which stage of the process your home is in and what state you live in. Talk to your local lender to find out more about your state’s regulations so you can know exactly where you are in the process and how to proceed from here.
  • Always read the fine print on foreclosure notices—It’s human nature to avoid unpleasant notices sitting on your counter, but if you’re receiving foreclosure mail, please read it. Find out the legal details and timeline of your foreclosure. Understand your state laws and how they’re going to affect you. Find out if your property has a “right of redemption” grace period in which to reverse the foreclosure. You have to know what you’re up against to know what to do next.
  • Always answer your lender’s phone calls—Again, as tempting as it is to avoid your lender during a foreclosure, don’t! Pick up the phone when they call or better yet call them first. Lenders have foreclosure avoidance counselors who are more than willing to help you turn your situation around and find financial assistance programs. Accept their help sooner rather than later.
  • Selling your home immediately can get you out of foreclosure—If you’re in the midst of a foreclosure or about to fall into one, fixing up your home and selling it quickly could be an excellent option for you. Talk to your lender to see if you have a “power of sale” clause in your mortgage. In the mortgage world, even a short sale is better for your lender than letting your home go into foreclosure.
  • Foreclosure has steep legal, tax, and credit consequences—I hate to be the bearer of bad news, but every homeowner should know that going through a foreclosure is going to heavily impact your credit score and your ability to borrow money in the future. Before you resign yourself to foreclosure, make sure you really have exhausted all your options first.
  • Going through a foreclosure DOES NOT mean you can’t get a VA loan—Foreclosing on your house is a rough trial for anyone, but it isn’t an end all be all. You can still buy homes in the future. And if you’re a veteran or active service member, you can still qualify for a VA home loan just two years after a foreclosure or bankruptcy—sometimes even sooner. Just remember that going through a foreclosure doesn’t make you a bad person, and it doesn’t mean you have to give up on being a homeowner either.