One out of every two hundred homes are being foreclosed. That is according to the Mortgage Bankers Association. That is that in every three months a quarter million families enter into foreclosure.
If you are thinking about foreclosure, you need to understand what it means to you.
You will lose all of the equity you have built up in your home
If a bank agrees to extend your mortgage, it will do so at a higher interest rate
Some employers require a credit check. Foreclosure may affect whether or not you get a potential job offer.
Your credit card rates are likely increase to increase due to a universal default clause in your credit card agreement.
You will pay taxes on the short sale for amount calculated by the difference between the purchase price of your home and the amount you owe at the end.
In some states, you are still liable to the lender for the balance of the loan after the short sale.
Foreclosure is not your only option. Banks and lending institutions now have ways help them recoup part of their loss while at the same time preserve homeowners chances of buying a home in the future. But before going there, do what you can to avoid foreclosure.
Steps to avoid foreclosure
Do not wait until you can no longer make payments before you talk to you lender. The bank needs you to stay in your home and pay the mortgage, so they will try to work with you.
Try not to miss a payment. At least try to make a partial payment. Explain the circumstances to your lender. They may be able to spread out the delinquent payment over several months.
The bank might agree to modify your loan and amortize it over a new term. When you do this, past-due interest and escrow amounts are added to the principal balance.
For an FHA mortgage you may be able to secure a partial claim from HUD. This is an interest free loan used to repay the past due interest and escrow on your home mortgage.
Sell your home. If your loan is not underwater, you will have enough money to pay off the balance, and retain any equity. If you are worried about making the next mortgage payment, find a home buying company that specializes in quick turnaround.
You may also want to look around online and follow links to find more about refinancing and quick sale options.