With millions of homes across the country going into foreclosure, it’s important for both buyers and mortgage holders to understand the process. When you’re in a pre-foreclosure, it’s super important to know what’s going on. This phase is like a crossroads where your financial situation and your home’s future are at stake. If you’re the homeowner, it’s your chance to find ways to fix your money problems and avoid losing your home. But if you’re looking to buy a property, pre-foreclosures can be a way to get a good deal. Still, you’ve got to understand the rules and the money stuff, so it’s smart to get help or do some research. So, bottom line, pre-foreclosure is a big deal, and knowing what you’re doing can really make a difference.
What is a pre-foreclosure anyway?
Many homeowners across America are facing difficulties making their monthly mortgage payments.
When a homeowner misses 3-6 months of mortgage payments, the lending institution will issue a warning, notifying the homeowner to pay or lose their home. This period is known as “pre-foreclosure.”
Banks and mortgage lenders typically provide three months for the homeowner to become current. Of course this number can vary by bank and situation sometimes.
If a homeowner fails to make the necessary payments, the bank will foreclose on the home, assuming ownership, and evict the homeowner. Thankfully, during this stage of the foreclosure process, a mortgage holder has the opportunity to take advantage of several options to prevent losing their home.
What is the Difference between Pre-Foreclose and Foreclosure?
Pre-foreclosure and foreclosure are two distinct stages in the process of a property being taken back by a lender due to the owner’s inability to make mortgage payments. Here’s the difference between the two:
- Pre-Foreclosure:
- Pre-foreclosure is the initial stage in the foreclosure process.
- It begins when a homeowner falls behind on mortgage payments and typically lasts for a specific period, depending on state laws and the terms of the mortgage contract (usually a few months).
- During this stage, the homeowner is still the legal owner of the property.
- The lender may send notices to the homeowner, such as a notice of default or a demand letter, indicating that they are in danger of foreclosure if the missed payments are not resolved.
- Homeowners may have the opportunity to work with the lender to find a solution, such as loan modification, short sale, or selling the property to pay off the debt and avoid foreclosure.
- Foreclosure:
- Foreclosure is the legal process through which a lender or mortgage holder takes ownership of a property when the homeowner has failed to meet their mortgage obligations, and the pre-foreclosure period has expired without resolution.
- In a foreclosure, the lender takes possession of the property and may sell it to recover the outstanding debt or, in some cases, keep the property as an REO (Real Estate Owned) asset.
- The homeowner is typically evicted from the property during or after the foreclosure process.
- The property may be sold at a foreclosure auction or listed on the market as a bank-owned property.
- The exact foreclosure process varies by state and country and can involve legal proceedings and court actions to ensure the property’s lawful transfer to the lender.
Pre-foreclosure Options for Borrowers
If you’re behind on mortgage payments, you’re likely to receive a “notice of default” from your mortgage lender.
This document will state that you have not made mortgage payments for the last 90-180 days. It’s important not to panic.
You have options that can delay or even prevent losing your home:
- If your mortgage is “above water,” (meaning you have equity in your house) you may be able to refinance your mortgage, receiving lower monthly payments. Check with your local Durham mortgage broker… or contact us and we can connect you with a reputable one.
- You may be able to quickly sell your home to a real estate investor that’s reputable in NC like us at Bull City Buyers, using the cash acquired to pay the months of back-payments owed (or we *may* be able to work out something with the lender that relieves all or part of your back payments.We can buy your Durham NC area home quickly, often in just a week or two, will pay in cash, and takes the stress out of trying to find a buyer.
- You can contact the bank and ask them to permit a short sale. In a short sale, you’ll sell your home for less than it’s worth, and the bank will take the loss as a tax write-off. In some short sales you may still be required to pay the difference to the bank if the house doesn’t sell for what is owed on the loan.
- You may be able to declare bankruptcy, which can buy you time to pay your debt. Bankruptcy will remain on your credit report for years, and can cause significant damage.
Lenders are very much aware of the widespread financial troubles across the country and they’re willing to work with borrowers a lot of the time.
If you’re honest and communicate with your lender, you’ll often find that there are options that will allow you to remain in your home, or at least salvage your credit rating.
A foreclosure can often negatively affect your credit score by 200-400 points and can prevent you from obtaining a loan of any sort for 5-7 years, so be very dutiful if you’ve received a Notice of Default from your lender.
But if you’re not able to find a solution with your lender working directly with them… connect with us. We may be able to help.
Ways We Can Help If You’re In Pre-Foreclosure
- We can potentially help with a short sale – Submit your info on this website so we can evaluate your situation to see if we can help.
- We can buy your house – We buy houses and would love to make you an all-cash offer on your house too. Just fill out the form here to get started >>
- You can ask us questions and we can provide you FREE guidance and resources so you can make a well educated decision. This costs you nothing, there’s absolutely no pressure, no obligation… just free guidance without a catch.
If you’re in the pre-foreclosure stage… you’ve still got time to fix this situation.
Just connect with your bank to see if they’re willing to work with you… or contact us if you’d like to see what we can buy your house for or to tap into our free foreclosure foreclosure resources.