What Sellers Need To Know About Foreclosure Effects In Lexington
If you find yourself faced having your home being in a foreclosure sale, then you should know some facts so you understand the best way to protect you and your family in the future.
A foreclosure does not have to be the end of your financial world. Homeowners need to know about the effects of foreclosure in Lexington so they can plan to buy another home in the future.
Possibly Collecting Some Of The Sale Proceeds
Homeowners are usually removed from the process when a bank forecloses on a property. The bank typically takes over the ownership of the property because the payments were not made. But homeowners may not know that they still may have an opportunity to get some cash when the home is sold.
Banks are not in the business of making money on properties through buying and selling like a real estate investor. The main thing that a bank wants is to get back the money that it loaned on the house. That’s called the mortgage amount. If a foreclosure sale ends up having a surplus that is more than the lien balances, then the excess funds go to the former owner in most states. That can be very helpful!
So maintaining the property as best as you can is very important. It could potentially put cash in your pocket.
However, most foreclosures are bought in disrepair because former owners take out their anger on the property being seized. Keeping the property in the best condition possible can yield a higher sale. And that could mean cash coming back to you. And any cash you get is good because it can help you move to the next step in your life.
The Effects Of Time On Your Credit
Foreclosure hits your credit score hard. In addition to the late or non-payments of the mortgage, the seizing of the property can drop credit scores two hundred or more FICO points.
A foreclosure will typically stay on your credit score for seven years which is the same amount of time as a bankruptcy. Rebuilding your credit can happen faster if you have a good payment history on a credit card and an auto loan. Most mortgage lenders will not loan someone money until it’s been three years since their foreclosure settlement (selling date).
Depending on the circumstances behind the foreclosure, some lenders will consider another mortgage sooner, but not before two years of the settlement date. Considered hardships included a loss of job or severe family illness or death. These need to be well documented and the circumstances leading to the foreclosure must be rectified prior to getting approval for a new loan.
Potential to Getting Home Back
Some homeowners in some states have the ability to reclaim their home even after the foreclosure sale. This is called a redemption. This option is usually available for homes seized through a judicial foreclosure.
If the home is eligible for redemption, the former owner may have one year to complete the redemption. The redemption requires paying the new owner for the total balance of the previous mortgage and remunerate the new owner for any repairs and upkeep.
While a foreclosure is a tough process to experience, it isn’t the end of the world and it is possible to buy another home. In most cases, with smart credit repair, buying another home can happen much sooner than many foreclosure participants expect.