The idea of your home getting foreclosed on can send a chill up your spine. It’s understandable. Thinking that a bank shuts you out of your home with ruined credit is an awful thought.
But here’s the reality check: Not everything that you’ve heard about foreclosing is true. Here are the most common misconceptions about the process.
MYTH 1: BANKS WANT TO FORECLOSE ON YOUR HOME
Not true. While the lender has a legal obligation to get back the money still owed, foreclosure is always the last resort.
Remember that banks get revenue from collecting interest, not owning real estate.
MYTH 2: YOU CAN’T REFINANCE WITH ANOTHER LENDER
Refinancing is one of the ways that many try to avoid foreclosure. But what you may not know is that you aren’t obligated to refi with your current lien holder.
You still want to consider your options as some variables affect whether a refi is a good option. For more details on refinancing to avoid foreclosure, please contact us.
MYTH 3: YOU CAN’T STOP FORECLOSURE ONCE IT STARTS
False! Halting foreclosure may be possible until your home goes up for public auction, as this is the final step in foreclosure. However, it may require back paying to make up for all the missed payments. Ensure you understand what the terms are and that you are indeed able to keep up with repayment.
MYTH 4: YOU GET KICKED OUT OF YOUR HOME PROMPTLY
Missing a few payments or getting a notice from your lender should put you on high alert. But don’t think that you will be evicted right away. You have the legal right to stay in your home until the foreclosure is final. In some instances, you could be allowed to stay longer.
MYTH 5: FORECLOSURE RUINS YOUR CREDIT PERMANENTLY
A foreclosure will stay on your credit report for at least seven years. But you may be able to get a mortgage again once you prove you are creditworthy. This may take as little as 2-3 years.
MYTH 6: YOU WON’T BE ABLE TO GET ANOTHER LOAN
Busted! You can absolutely get another loan after foreclosure. The rate you are eligible for may be higher if the foreclosure still appears on your report. However, get another loan and buy another home after foreclosure.
MYTH 7: FORECLOSURE IS ALWAYS BAD
For some, foreclosing is a reset of their financial life. If you have zero equity or negative equity in the home, just letting the house go maybe your best option. This may seem counterproductive, but adjusting where you put your money could provide relief when finances are scarce.
Please contact us for more help with understanding your loan options.