It is important you understand what foreclosure means and why it is so important to get help early to avoid it.
Foreclosure is a legal process by which the lender takes back ownership of mortgaged property and sells it because a loan is in default, or in other words, because the owner is delinquent with the mortgage payments and/or interest payments on his or her mortgage. The process of foreclosure is different in every state. In some states, a non-litigated foreclosure can take as little as 32 days. In other states, it's a process that could take more than a year. In either case, the results can be devastating:
- You would lose any equity in your home. If you have equity in your home or your home has increased in value since your purchase, a foreclosure could mean the loss of thousands of dollars in equity.
- Your credit score would take a big hit. With a foreclosure on your credit history, you will have future difficulty borrowing money, renting an apartment, and perhaps even getting a job.
- Finding a new home will be a challenge. Not only must you find some place that's affordable, you'll also need to come up with a rental deposit, which the landlord could drastically increase, based on your credit rating.
- The interest rates on your credit cards could increase as the credit card companies view you as an increased risk.
- You could even be hit with a bill for taxes on the amount of mortgage that the lender was never able to recover from the sale of the property.
