foreclosure2If you’re behind on mortgage payments and see no way of catching up, you’re probably starting to wonder, “How does foreclosure work?” Tens of thousands of people just like you are looking up information on the foreclosure process every day, in fact. With thousands of people across the country losing their homes each day, this is a hot topic. You don’t have to go searching all over the web to find this information, however. You’re about to find out all about the foreclosure process, right here.

The Good News: You won’t lose your home overnight…

The first thing you should know is that you won’t lose your home overnight. This should give you some hope and maybe even a feeling of relief. Many people are afraid the bank is going to kick them out as soon as they become delinquent, leaving them homeless. This just doesn’t happen. If you’re behind on your payments, you’ll receive several late notices first, usually one a month or more for two to three months. These late notices are your opportunity to get current on your loan.

If you can’t get current and don’t contact your bank to try to work out a repayment plan for the late payments, the bank will then move to start the process of repossessing your house. You should remember that the bank doesn’t own your house, you do. However, you’ve put up the house as collateral on the loan the bank gave you to buy it. If you don’t make payments, the bank is entitled to take that collateral to cover their interests.

Because you own your house, you can sell it or pay off the mortgage in full at any point during the foreclosure process. This process differs by state, and can take anywhere from three months to a year or more, depending on state laws. After several late notices, your bank will file a lis pendens with the court in the county in which your house sits. This is an intent to foreclose. Then, the long journey through the court system begins.

If you’ve continued to not pay or work out a payment arrangement during this time, the court will eventually set a sale date for your house. The house will be sold at auction to the highest bidder, with the proceeds going to the bank.  Depending on the state, this sale may take place at the courthouse, at your actual house, or elsewhere. Once the sale is complete, you no longer own the home and must move (the date you must move will depend on when the new owner tells you to leave…..though some new owners will rent the house back to you, if you ask).  Some states provide a redemption period of several days to several weeks in which you can still pay off the mortgage and get your house back, even if it’s sold at auction, but not every state allows for this.

If you’ve been wondering, “How does foreclosure work?,” these are the basics. Of course, the full process is far more detailed and drawn out than this, but this should give you a general idea of what to expect if you’re in this situation. Because you won’t lose your home right away, this gives you a chance to either stop the process and stay, or sell the house and move. You should take advantage of the time you have to work things out, so you don’t end up like so many other people who’ve lost their homes and had nowhere to go after.

This is the second installment in our foreclosure series. Be sure to check back for updates…

Filed under: Foreclosure

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