Foreclosures, Short Sales, and Other Things You Need to Know – Part 1 of 3

With adjustable mortgage rates climbing some homeowners are being priced out of their homes.  Here are some answers to your questions regarding foreclosure and short sales from the perspective of a homeowner facing tough decisions.

Pre-foreclosure – While there is no strict legal definition of a “pre-foreclosure” in Minnesota, it is generally considered to be the period of time starting when the homeowner first acknowledges they can no longer make their mortgage payments and ends when the lender decides to begin the legal process of foreclosing on the property.  Many lenders will begin the foreclosure process after 3 or 4 missed mortgage payments, but it is up to the individual lender to decide when to begin the foreclosure process.

The homeowner has an opportunity to prevent the foreclosure during this period by:

·        Selling their home and using the proceeds to pay the lender in full.

·        Contacting the lender to advise them of their situation.  Many lenders will work with the homeowner - within reasonable limits – to avoid a foreclosure.

·        Paying all missed payments and penalties to come current on the loan.

·        HUD approved counseling agencies may also provide you with assistance.

There are many foreclosure prevention schemes and plans.  Consumers need to be sure they understand the situation completely before choosing a course of action.  Since a foreclosure can ruin your credit for up to 10 years, it is very important to avoid a full foreclosure if at all possible.

This can be an emotional time and expert advice is critical.  Try not to dwell on what you could have gotten for your home several years ago or being too inflexible if you decide to sell.  Remember the goal is to extricate yourself from a bad situation, hopefully without ruining your credit. 

Read parts 2 and 3 for more detailed information and contact me for further assistance.

Part 3 – Short sale process in detail