Most often than not, being unable to pay your mortgage payments can soon lead to more serious financial and property problems. One of which is the possibility of property foreclosure.
While it might sound a little harsh, still the lender has all the right to take away the property of the borrower, granted that the latter was not able to pay the balance of the mortgage of the said property.
To have a better understanding about property foreclosure, it is important know about its basic principles and procedures.
Property foreclosure is a legal process by which the right of the borrower to claim a mortgaged property is removed, most commonly as a result of a person’s delinquency in paying his mortgage. The lender, such as a bank, will file the foreclosure after the borrower had missed two to three months of the housing monthly loan payment.
The borrower will be given a notice regarding his failure to make up for the payments. He will be given 20 days to respond. The court will then proceed to approve the foreclosure if the borrower has done nothing to take action with regards to the notice or if he was not able to meet the conditions of the agreement. The lender will then legally take the house or property, and this will be put up for sale or auction to the public.
Nevertheless, there are alternatives to avoid an impending foreclosure. One of the best options is putting up your house or property for sale. In real estate terms, it is known as short sale.
The procedure of a short sale is simple. The property owner/debtor puts the house or property for sale, with the value lower than that of his outstanding balance on his mortgage. The proceeds of the sale will serve as the payment for the person’s loan balance. The lender might suffer minor financial loss as a result, yet still short sale remains the most practical and economical answer to avoid the hassles of foreclosure process.
However, short sale can also have a negative effect on the person’s credit report, though not as severe as undergoing a foreclosure process. Additionally, it does not automatically eliminate the remaining mortgage balance except if the parties involved agree on such settlements.
Still, when faced with an impending property foreclosure, a short sale remains the most practical way to avoid foreclosure. Although it has its own share of drawbacks, at least these shortcomings are not as serious as those in property foreclosure.
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