Hopefully, you never have to learn about foreclosure. It’s an extremely stressful process that some have to go through when they become unable to continue paying their mortgage. As scary as foreclosures can be, there are many common misconceptions out there that are fueling the fear. We’re here to debunk some of the most common myths floating around about the foreclosure process, hopefully giving you some peace of mind!
Myth: Foreclosure Is One Moment In Time
Some people think that a foreclosure happens in one instant moment. Fortunately, that is not how foreclosures work.
Fact: Foreclosure Is A Process
It is important to understand what it means why homes enter foreclosure. Foreclosure is actually a process where the lender attempts to recover the amount that is still owed on the house by selling it. This process typically doesn’t even begin until your third missed payment. The foreclosure process can last months or even years, and banks have to follow many formal steps before they can legally seize your house and sell it at auction.
Myth: You Will Be Kicked Out Immediately
Oftentimes, people assume that they will be evicted from their home as soon as they miss their first payment. In fact, some people just walk away without attempting to stop the foreclosure. This is not the case, and homeowners have certain rights during the foreclosure process.
Fact: You Can Stay In Your Home Until Auction
As mentioned above, they cannot seize and sell your home until the entire foreclosure process has been completed, which can take up to three years in some states.
Myth: There Is No Way Out of a Foreclosure
You probably are aware when you miss your first mortgage payment, and when you get the notice of default, you may really start to panic. However, now is the time to key in and focus on saving your house or avoiding foreclosure.
Fact: You Can Stop a Foreclosure
Up until the moment the house sells at auction, you still have a chance to get back in good standing with the bank or sell your house to pay off the outstanding debt. If you’ve fallen into financial hardship but manage to recoup, you can pay the missed payments plus any interest incurred. Another option is to sell your home before the bank seizes it and use the proceeds to pay back your mortgage. It’s always important to understand the facts of foreclosure.
Myth: The Banks Like to Foreclose on Homes
A majority of people think that the big banks want to foreclose on people’s homes and make money off of people’s hardships. That isn’t necessarily the case, and banks can often lose money on foreclosures as well.
Fact: Most Banks Want to Help Prevent Foreclosure
Most banks will help you try to avoid foreclosure, especially if you reach out to them as soon as you know that you’re going to have issues paying your mortgage. Often, they will offer a forbearance agreement to put a pause on your payments for a determined amount of time. Other options include refinancing your loan or potentially modifying it.
Myth: People Experiencing Foreclosures Are Fully Responsible
For those that have never been in the position of having a house in foreclosure, it is easy to assume that the people going through it are fully to blame. Maybe you think they were irresponsible or bit off more than they could chew, but usually, it’s caused by unexpected situations that arise and is out of homeowners’ hands.
Fact: Factors Outside Your Control Can Cause Foreclosure
Some of the most common causes of foreclosure include sudden loss of a job, death, divorce, medical emergencies and illnesses, and natural disasters. All of those situations are caused by outside factors that homeowners have little to no control over. Foreclosures can even happen thanks to questionable lending processes.
Myth: After Foreclosure, You Can Never Own a Home Again
Many people think that once you experience a foreclosure that you will never be able to get a loan or buy a home again. While foreclosures definitely damage your credit score and might prevent you from getting a loan in the immediate future, there are options for fixing your finances.
Fact: You Can Repair Your Credit and Acquire a Mortgage in the Future
Foreclosures definitely have a negative effect on your credit score – there is no way around that. You will start to see the effects as soon as you miss your first payment. Hard work, dedication, careful planning, and time can help your credit score recover. After seven years, the missed payments will start to fall off your report. In the meantime, make sure to pay all of your bills on time, monitor your finances closely to avoid similar issues, and get professional help to bring up your score.
Myths: The Banks Can Take All of Your Personal Possessions
Images of the bank showing up to your home and immediately removing you and your family might lead you to believe they can also claim all your personal effects to sell at auction as well. This is most definitely not the case.
Fact: You Can Pack Up all Your Personal Belongings Just As You Normally Would
The bank only has rights to your home, not your things. If you’re not able to stop the foreclosure process, you can use this time to live rent-free and try to get back on your feet. Once you’re formally evicted, you can pack up your belongings and move to a new place.