When Foreclosure Occurs

If you are a home-owner, foreclosure is a situation you will want to avoid at all costs. At its most basic level, foreclosure is the legal method your loan provider can use to repossess your home. When this happens, you must move out of your home and pay any other costs that are associated with the foreclosure. Not only are you then in further debt with no home but you may also be denied credit in the future.

The process of foreclosure begins after you have missed several of your mortgage repayments. Your provider must file a public default notice which is known as a Notice of Default. This officially initiates foreclosure proceedings.

There are four common outcomes from a foreclosure procedure. Firstly, you can try and put yourself back in your provider's good graces by paying off a default amount of your loan. This must be done in a time period specified by the legislation in your state. Secondly, you can sell your home to a third party during this time period. You can use the money from the sale to pay your provider back the money it loaned you. Many people will use this option to avoid leaving a black mark on their credit rating.

Another way in which the foreclosure process will come to an end is when your home is put up for sales at an auction. This is done at the end of the specified period in which you were meant to make a default payment on the loan. The buyer who purchases your home at the auction will pay back your provider directly.

A final option is when your provider repossesses your home and sells it on the property market to recover the money you owe. Your provider can either take your home off your hands directly or purchase it at an auction.