Foreclosure - the Basics

<h1>Foreclosure - the Basics</h1>Author: <a title="Greg Chan" href="http://www.articlesbase.com/authors/greg-chan/81523.htm">Greg Chan</a> Foreclosure occurs when a borrower fails to make payments on his or her mortgage. The lender then obtains a court order to repossess the property and sell it to recoup the mortgage.
Types of Foreclosure
There are several types of foreclosure. Judicial foreclosure and foreclosure by power of sale are the two most common. In judicial foreclosure, the residents must move out of the home in a specified period of time. The sale of the mortgaged property is then conducted under the supervision of a court. When the home is sold, the proceeds are first used to pay back the first mortgage. Any remaining proceeds will go to other lien holders and then finally the borrower, if anything is left.
With foreclosure by power of sale, the lender can sell the home without the supervision of the court. A "power of sale" clause, however, is usually required in the mortgage contract in order for this type of foreclosure to occur. In addition, this type of foreclosure does not provide the lender with a deficiency judgment. This makes it difficult to obtain title insurance for the property. Like a judicial foreclosure, once the home is sold, proceeds must first go to pay off the mortgage and any other lien holders.
While these are the two most common types of foreclosure, there are also other types of foreclosure. Since foreclosure laws can vary in each state, if you are facing foreclosure, it is best to obtain legal advice in your area.
How to Avoid Foreclosure
If you can no longer meet your mortgage payments, do not be embarrased.  The first step is to contact your lender.  Your lender may be open to some of the following options:
Forebearance: Lenders may be willing to postpone taking legal action against you and let you work out a repayment plan that is feasible for you.
Repayment Plan: Lenders may let you spread out the missed payments over a longer period of time.  You would pay a little extra in your future payments to make up for those that were missed.
Note Modification: Lenders may change the parameters of your loan.  For example, they may freeze your rate on an adjustable loan.  They could also extend the term of your loan.
Refinance: The lender may add the missed payments back on to the balance of the loan.  This is only available if you have sufficient equity and meeting lending requirements. 
Debt Forgiveness The lender might waive your obligation on some of your missed payments.  This, however, rarely happens.
How to Stop Foreclosure
Sell Your Home: Sell your home and use the proceeds to pay off the mortgage.
Short Sale: If your home is worth less than your mortgage, talk to you lender about a short sale.  In a short sale, the lender agrees to selling the home at market value and forgiving the remainder of the loan.  A short sale affects your credit but not as bad as a foreclosure.
Deed-in-Lieu of Foreclosure: In this scenario, the lender signs over the property’s deed to the lender in exchange for closing the loan.  Deed-in-lieu of foreclosure, however, affects your credit the same as foreclosure. 
 
For more information about foreclosures, visit <a href="http://LendingForeclosure.com/">LendingForeclosure.com</a>About the Author: Greg Chan is a business and finance expert. He has authored several articles on real estate and foreclosures. For more information, visit <A href="http://LendingForeclosure.com/">LendingForeclosure.com</A>Article Source: <a href="http://www.articlesbase.com/">ArticlesBase.com</a> - <a href="http://www.articlesbase.com/real-estate-articles/foreclosure-the-basics-561760.html" title="Foreclosure - the Basics">Foreclosure - the Basics</a>

Foreclosure occurs when a borrower fails to make payments on his or her mortgage. The lender then obtains a court order to repossess the property and sell it to recoup the mortgage.

Types of Foreclosure

There are several types of foreclosure. Judicial foreclosure and foreclosure by power of sale are the two most common. In judicial foreclosure, the residents must move out of the home in a specified period of time. The sale of the mortgaged property is then conducted under the supervision of a court. When the home is sold, the proceeds are first used to pay back the first mortgage. Any remaining proceeds will go to other lien holders and then finally the borrower, if anything is left.

With foreclosure by power of sale, the lender can sell the home without the supervision of the court. A "power of sale" clause, however, is usually required in the mortgage contract in order for this type of foreclosure to occur. In addition, this type of foreclosure does not provide the lender with a deficiency judgment. This makes it difficult to obtain title insurance for the property. Like a judicial foreclosure, once the home is sold, proceeds must first go to pay off the mortgage and any other lien holders.

While these are the two most common types of foreclosure, there are also other types of foreclosure. Since foreclosure laws can vary in each state, if you are facing foreclosure, it is best to obtain legal advice in your area.

How to Avoid Foreclosure

If you can no longer meet your mortgage payments, do not be embarrased. The first step is to contact your lender. Your lender may be open to some of the following options:

Forebearance: Lenders may be willing to postpone taking legal action against you and let you work out a repayment plan that is feasible for you.

Repayment Plan: Lenders may let you spread out the missed payments over a longer period of time. You would pay a little extra in your future payments to make up for those that were missed.

Note Modification: Lenders may change the parameters of your loan. For example, they may freeze your rate on an adjustable loan. They could also extend the term of your loan.

Refinance: The lender may add the missed payments back on to the balance of the loan. This is only available if you have sufficient equity and meeting lending requirements.

Debt Forgiveness The lender might waive your obligation on some of your missed payments. This, however, rarely happens.

How to Stop Foreclosure

Sell Your Home: Sell your home and use the proceeds to pay off the mortgage.

Short Sale: If your home is worth less than your mortgage, talk to you lender about a short sale. In a short sale, the lender agrees to selling the home at market value and forgiving the remainder of the loan. A short sale affects your credit but not as bad as a foreclosure.

Deed-in-Lieu of Foreclosure: In this scenario, the lender signs over the property’s deed to the lender in exchange for closing the loan. Deed-in-lieu of foreclosure, however, affects your credit the same as foreclosure.

For more information about foreclosures, visit LendingForeclosure.com

Greg Chan is a business and finance expert. He has authored several articles on real estate and foreclosures. For more information, visit LendingForeclosure.com

Rate this Article:

0 / 5 stars - 0 vote(s)

Re-Publish

Article Source: http://www.articlesbase.com/real-estate-articles/foreclosure-the-basics-561760.html

Article Tags: Real Estate, Bad Credit, Mortgage, Credit, Foreclosure, Bankruptcy, Foreclosures, Stop Foreclosure, Bankruptcies, Stop Foreclosures, Stop Bankruptcy, Stop Bankruptcies

Related Articles
Related Q&A

Latest Real Estate Articles
More from Greg Chan

Seven Hills, Georgia: Nothing Beats This Position Total Year Round

By: Jason Cantrantz | 16/11/2009
For Georgians, nothing will ever amaze Lake Arrowhead. It offers a Shangri-la of purely outside recreation with a very diverse setting Total year through. Each and every season, Seven Hills, Georgia offers you a contrasting beauty. It may be about the atmospheric condition or the season, but to be right,...

Seven Hills, GA : Beautiful Custom Homes

By: Jason Cantrantz | 16/11/2009
Seven Hills, GA is exactly 45 minutes away from Atlanta. It is settled about 2 miles southwest of Waleska, Georgia and located in the northwestern mountainous sphere of Cherokee. Waleska is home to Lake Arrowhead. It is one of the most frequent and enviable communities in not simply Cherokee County...

Cyprus developers

By: Robert Linley | 16/11/2009
Those of you who wish to own a property in Cyprus but you do not wish to spend so much money on acquiring one should look for Cyprus developers. They are the people who can offer a house, apartment, or condo to you at a cheaper price. Instead of going to an agent, which most new comers go to when they are in the country, what you can do is search for the developers and then talk to them about the kind of property that you are looking for.

Cyprus Properties for Sale

By: Robert Linley | 16/11/2009
Are you looking for Cyprus properties for sale? If you are, then the first thing I would recommend you to do is turn on your computer and try to find out as much information about buying a hose or any other property in this country. This will give you a fair idea about the places where the potential properties are located. In fact, you will also be able to see the photographs of many potential houses, apartments or condos on the internet when you are search for a good property online.

Cyprus Property For Sale

By: Robert Linley | 16/11/2009
Are you fascinated by Cyprus? If you are and you are thinking about buying a property there, then you will be happy to learn that you can get a wonderful Cyprus property for sale. Before you think of anything else, you should first decide on the region where you want to own a property. Once you have decided on a city or town where you wish to look for a home, you can look for the potential houses there.

The Best Home Improvement Tips for Added Value in your House

By: Marikor Hidalgo | 16/11/2009
Upgrading your home is done with different reasons and expected outcomes such as for personal pleasure in seeing the fruits of your labor and making the renovation for resale purposes.

Cheap Home Update – Fundamental Tips before Selling your House

By: Maria | 16/11/2009
Home selling is definitely a challenging yet fulfilling venture in the real estate industry hence more and more home owners opted to try their luck in this pursuit. It is a relevant resort to actually sell your house in the midst of an ailing economy, however you need to consider the different setbacks you may probably encounter.

Great Spot for Seniors and Retires

By: Aniruddha Badola | 16/11/2009
Texas is one of the most popular retirement states because many seniors prefer living in areas where the climate is warm. With their arthritis kicking in, elderly people prefer to settle down in places where they can relax under the sun. For those who are planning to invest in Texas Real Estate...

Tips for Buying Foreclosures

By: Greg Chan | 21/09/2008 | Real Estate
With the current chaos in the real estate market, it seems that there are foreclosures everywhere. If you’re interested in buying a new home or an investment property, foreclosures offer a great way to get a rock bottom price on a property. Buying a foreclosure property, however, can also have some inherent risk. The risks associated with buying a foreclosure stem from the lack of normal protections you would get from buying a conventional house.

How to Buy Short Sales

By: Greg Chan | 20/09/2008 | Real Estate
Are you interested in buying a new home or a real estate investment property? The current turmoil in the real estate market offers astute buyers great opportunities to buy real estate at a discount. A record number of homeowners are now either in or at risk for foreclosure. Foreclosure, however, will destroy the credit of a homeowner. An alternative to foreclosure is a short sale. In a short sale, the homeowner and lender agree to sell a property for less than the amount owed on the loan.

What is Day Trading?

By: Greg Chan | 14/09/2008 | Day Trading
Day trading is the practice of buying and selling financial instruments, such as stocks, stock options, currencies, and futures contracts, within the same day such that your positions are usually closed before the end of the day. Day trading used to be the sole realm of professional investors. In fact, many day traders work for banks or investment firms. Advances in technology and the Internet, however, have allowed even amateur traders to day trading.

Structured Settlements - the Basics

By: Greg Chan | 14/09/2008 | Personal Finance
Are you a victim of malpractice or personal injury? If you win a large case, you may have the option of getting a structured settlement. In a structured settlement, instead of getting paid in one lump sum, payments are made to you over time. Structured settlements are often set up by purchasing several annuities to guarantee payments over a long period. But why would anyone want to get paid over time instead of all at once?

Obesity 101 - Gastric Bypass Vs. Gastric Banding Surgery

By: Greg Chan | 14/09/2008 | Medicine
Obesity is a major health crisis in America. For those who are obese, diet and exercise are often not enough. Weight loss surgery is often the best option.

Investment Opportunities in Foreclosures

By: Greg Chan | 14/09/2008 | Real Estate
Are you looking for an investment opportunity in real estate? Foreclosures can be a tremendous opportunity for new investors. The profits can be enormous. Foreclosure investing, however, does have risks and one must be fully prepared before beginning.

How to Repair Your Credit

By: Greg Chan | 14/09/2008 | Credit
If you have bad credit, you know how it can be a nightmare. A bad credit score can negatively affect your life in many ways. People with bad credit not only have to pay higher rates but also have lower credit limits on their cards. But how can you repair your credit?

How to Pick a Lawyer

By: Greg Chan | 14/09/2008 | Personal Injury
Picking a lawyer can be very stressful. Without a legal background, it is often difficult to tell the difference between one attorney and the next. This is further complicated by the degree of specialization in legal services. So how do you pick a lawyer?