Foreclosure

Why is determining your mortgage affordability of utmost importance when you take out a mortgage? This is because it helps you to find out if you are at a risk of losing your home in foreclosure.

As such there are various aspects that are taken into account when you apply for home loan.

Foreclosure – a nightmare for many homeowners



Following the subprime mortgage crisis, the number of people losing their homes in foreclosure has escalated manifold. This is because for some reason or the other, they failed to live up to their mortgage payments.
An important aspect that you need to keep in mind before taking out a mortgage is that you are taking on financial responsibility for the next couple of years. And it is very important that you remain consistent with your monthly mortgage payments.
The foreclosure crisis has spread like wild fire throughout the United States of America. And it is unfortunate that the situation has not turned around fully. As such people have to face the wrath of the real estate disaster.

Foreclosure



Foreclosure basically means that your mortgage lender will take away your home if you are not able to make payments to him on a regular basis. If you are delinquent on your mortgage payments for 2 months you eventually receive a Notice of intent from the lender. If you fail to respond within the stipulated time period, you will receive the Notice of Default.


You are given sufficient time to make mortgage repayments. The time allowed for making mortgage repayment may differ from one state to another. And depending on the state in which you reside, you may be allotted time. Failure to make mortgage payments will put your home on public auction.

How will you stop foreclosure?

The best way to avoid foreclosure is not to fall behind on payments. However, due to unforeseen events, you may be forced to default on mortgage payments. Some of the reasons that may cause your finances to go haywire include –
* Death in the family
* Job loss
*Divorce or marital separation
* Ill health etc

The moment you anticipate a financial crisis in near future, the best is to talk to your mortgage lender and work out a method that can prevent you from reaching the point of foreclosure. But if you receive the Notice of Default, there is very little you can do to stop foreclosure.

Ways to avoid foreclosure

There are many ways you can avoid foreclosure and few of them include –

* Work out a repayment plan by talking to your lender
* Opt for the emergency mortgage assistance plans.
* Short sale
* Sell off your home
* Loan modification
* Deed-in-Lieu etc

However, one of the most prominent ways of keeping foreclosure at bay is by opting for refinancing your mortgage. Refinancing is when you take out another mortgage of a higher amount by using the same security.

Can bankruptcy help in stopping foreclosure?



There is another way in which you can stop foreclosure. However, this is a process which defers the foreclosure process and may not stop it completely. If you are filing Chapter 13 or Chapter 7 bankruptcy, it gets recorded in your credit report for a period of 7 and 10 years respectively and your credit nose dives miserably.
Filing bankruptcy allows you to enjoy Automatic Stay which gives you some more time to pay off your debts. However, if your mortgage lender has taken court order to carry on with the foreclosure process, the Order for Relief or Automatic Stay may not benefit you wholly. It may at the most delay the foreclosure process by 2 months.
There is another instance when filing bankruptcy will not help you. If you have already been served Notice of Default, you will have no options but to watch your home being lost to foreclosure.