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The 4 stages of foreclosure that homeowners should know about

If you are a homeowner, you have probably heard of the dreaded f-word: Foreclosure. If you are facing foreclosure, you may feel overwhelmed--but you are not alone. The rate of homes that are currently in foreclosure is currently about 1 percent. During the recession of 2011, the figure climbed to 3.6 percent.

Many people have faced home foreclosure and either prevented it or come out stronger on the other side. One of the best things that you can do is learn more about the foreclosure process and what it could mean for you. In this post, we will address the four major stages of foreclosure that homeowners should know about.

  • Pre-foreclosure

Pre-foreclosure is when a homeowner has gone 90 days or more without making a mortgage payment, but their house has not yet been repossessed by the bank. You may be in this stage of foreclosure if you have been struggling to pay your mortgage on time for a while. Many mortgage contracts have a 15-day forgiveness period during which a homeowner can pay their past-due mortgage without incurring any penalties. Longer than that, though, and your home may technically be in pre-foreclosure. In this stage, it would be wise to consult with an attorney who specializes in foreclosure defense. You may also get in touch with your lender and try to work out a mortgage repayment plan.

  • Foreclosure

Foreclosure occurs when a homeowner misses several mortgage payments and the bank repossesses the house. The foreclosure process often seems to sneak up on you quickly, when in fact it can be a very long process. In the United States, the average home foreclosure takes about 900 days to complete. Generally, you will be allowed to stay in your home while the paperwork is being completed. Once the process is finalized, however, you will be given a notice to vacate and a notice of sale. This means that you must move out of your house before it is sold during the next step of foreclosure--an auction.

  • Auction

Once your lender has repossessed a house, they will usually sell it in a public auction to recoup some money. In a foreclosure auction, the winning bidder will receive a deed to the home once the purchase is complete. Sometimes, no one buys the foreclosed property. The house is then considered a bank-owned or real-estate owned property, is put on the market again and sold as is.

  • After the foreclosure

After your home goes into foreclosure, you will need to find a new place to stay. This is one of the most important concerns that you should address during the foreclosure process. Once the foreclosure is over, anticipate that your credit score could be significantly hurt. A foreclosure goes on your credit report for up to seven years and can affect your ability to get credit cards or other loans. You can still work with a financial adviser or attorney who can give you financial and legal counsel. 

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