Foreclosure Questions
From Adviceopedia
If you have foreclosure questions, you're far from alone. Large numbers of people are forced to foreclose on their homes due to job loss and other factors. Foreclosure questions are common in a shaky economy but still occur at boom times too.
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Common Foreclosure Questions
There are several foreclosure questions that come up time and time again among those who must go through the trauma of foreclosure on their homes.
What Exactly Is Foreclosure?
If you can't pay your mortgage, your rights to your property may be taken away. The lender can then sell your property. The money made can pay off the mortgage and any liens on the property.
How Long Does It Take?
First, your payments will have to become delinquent. How many payments you can miss will be stated in your contract. Once you've hit that number of missed payments, you'll be issued a Notice of Default. Normally, you will have 110 to 115 days before the process is complete. It's wise to hire an attorney during the process to make sure that you understand all of your rights. Please keep in mind that several factors go into the length of time a foreclosure takes, including the state where you live.
Can You Stop the Foreclosure Process?
It's possible. You can:
- Pay all of your mortgage payments, late fees, foreclosure fees, taxes, and insurance premiums
- Refinance
- Attempt to work out a different payment plan with your lender, but you must do this early
- Sell your home—even through a short sale. Talk with your bank to find out if a short sale is even a viable option. In a short sale the bank is taking less than what is owed on the loan and not all lenders will allow this.
Can You Claim a Loss on Your Taxes?
Unfortunately, if you lose money on your home because of a foreclosure it will not be deductible on your taxes.
Is It Possible to Make Money on a Foreclosure?
It's possible, but difficult. You'll have to first pay back what you owe the bank on the mortgage, plus any court fees or property taxes. There probably won't be much money left to go around once the foreclosure is done. Theoretically, however, you could make money on a foreclosure.
What Are the Consequences of Foreclosure?
This is perhaps one of the biggest foreclosure questions. A foreclosure will affect your credit score. However, the number of points it will bring it down will depend on all of the additional data in your credit file. In addition, your credit card interest rates could skyrocket. How long you'll be victim to high interest rates will depend on your credit as a whole and whether it was good in all areas except the foreclosure.
You may also have a hard time finding another home. After foreclosure, you won't be able to get another mortgage loan for five years. There are some exceptions if you had good credit before and after the foreclosure and an event you couldn't control occurred, such as job loss, you may be able to get that loan after three years instead. In the immediate aftermath of the foreclosure, you'll also need a place to live. The foreclosure could scare off potential landlords or you may not have enough cash for the deposit even if they will rent to you despite the foreclosure on your record. If you see foreclosure in your future, check out the "Cash for Keys" program, which could help you come up with that deposit money for the rental home.
The Cash for Keys program was designed to get the inhabitants of the foreclosed homes out quickly and without going through the eviction process, with the houses left in good condition. With this program, if you vacate your home willingly and leave it in good condition, the bank could literally give you a small (negotiable) amount of "cash for your keys." You sign the paperwork, the bank owns your home, and you set a moving date. Even renters can get something from the Cash for Keys program. If you are renting a home that is being foreclosed on, you may also be given cash for your keys to help with moving expenses and a deposit in a new place to live.
Finally, be prepared to receive a tax bill from the IRS. When a debt is forgiven, the money that you would have paid out to your mortgage suddenly becomes taxable income. In addition, there could be late fees or penalties attached. If you can prove that you're insolvent or that the loan process was flawed from the beginning, you may be able to get out of paying the tax bill.
How Do You Identify Foreclosure Rescue Scams?
It's easy for scammers to find your information through public foreclosure notices. They then contact you and claim to be able to negotiate with your lender, asking for a fee that they in turn pocket and run. Some trick you into signing over your title instead of signing up for the new loan they promised. In other cases, they turn your home into a "rent-to-buy" situation where you live there as a renter and then buy it back later, but they go bankrupt and you still are evicted. The FTC lists a few red flags. You should avoid businesses that:
- Guarantee that they can stop your foreclosure process no matter what
- Tell you not to contact any other help, such as your lender, lawyer, or financial counselor
- Asks for a title or deed transfer
- Asks you to pay them before they begin the service (that includes sending your mortgage payments to them instead of your lender)
Instead of going with these businesses, first contact your lender and let them know you are having trouble making your payments. It's in their best interest for you not to have to foreclose on your home, so they may be willing to work with you—and you know they're legitimate. There is also a free, non-profit credit counseling service at 1-888-995-HOPE. You can also find more information regarding foreclosure questions of this nature at HopeNow.com.
