What is a Foreclosure?
First lets define a foreclosure. When a foreclosure takes places a process is initiated where a lender begins seizing and selling a property to a new buyer when a borrower fails to make their mortgage payments as agreed. This allow the lender to recover at least some of the remaining mortgage balance.
The timeline and legal process for foreclosure can vary from state to state, but the end result is the same: The mortgage borrower loses their home.
A mortgage forms a lien against property, giving lenders the legal right to move in and take ownership in the event that the borrower defaults. The lender will then almost invariably sell the property to recoup financial losses on the home after it takes control of it. Investors and consumers can purchase these homes, often at auctions or directly from the bank or government agency that owns them.
But How Does It Work ?
Foreclosures typically occur because the homeowner has failed to make agreed-upon payments on the mortgage, but the reasons behind nonpayment can vary. Sometimes job or income loss is the culprit, or a borrower might find that medical bills or credit card debt make it impossible for them to stay afloat. Foreclosure can be the result of bankruptcy, divorce, or disability. Foreclosures must advance through judicial proceedings in some states before the home can be taken, but other states offer non-judicial options.
Remember: A foreclosure can't legally be initiated until a borrower is at least 120 days behind on their mortgage payments.