What Is A Foreclosure?

When you buy a home with a home loan your mortgage lender automatically has security interest in your property. This security interest gives your lender the right to foreclose on your home if you do not make the scheduled payments toward the loan. This means they can auction or sell your house and use the proceeds to cover the outstanding loan. If the property is sold for less than the amount owed on the loan then they now have the right to file a judgment against you to cover the remaining balance on the original loan. A foreclosure on your home will significantly hinder you from buying real estate in the future as you would be considered a high risk candidate for another home loan.

You should make every effort to avoid foreclosure on your home if at all possible. If your financial situation is temporary then you should contact your lender and see if there is anything that can be worked out short term to help you avoid this process. Some lenders have a loss mitigation department that may lower your payments for a few months or even suspend your payments for a few months until you are able to begin making regular payments.

You should also explore possibly renegotiating your current loan. If the interest rates are lower than when you originally borrowed the money, refinancing could lower your payments significantly. Obtain quotes from different lenders to make sure you are getting the best refinancing option for your situation.

As a final option, you may want to try to sell your home on your own. This would at least preserve your credit and allow you to purchase real estate in the future.

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