Understanding Pre-Foreclosure: Everything You Need to Know
With millions of homes across the country going into pre-foreclosure, it’s important for both buyers and mortgage holders to understand the process.
So what is pre-foreclosure in Broken Arrow any way?
Countless homeowners across America and Broken Arrow continue facing difficulties in making their monthly mortgage payments in 2020.
If a homeowner misses 3-6 months of mortgage payments, the lending institution will issue a warning, notifying the homeowner to pay or lose their home. This period is known as “pre-foreclosure.”
Banks and mortgage lenders typically provide three months for the homeowner to become current. Of course, this number can vary by bank and situation sometimes.
If a homeowner fails to make the necessary payments, the bank will foreclose on the home, assuming ownership, and evict the homeowner. Thankfully, during this stage of the foreclosure process, a mortgage holder has the opportunity to take advantage of several options to prevent losing their home.
What is Pre-Foreclosure?
Pre-foreclosure is a legal process that begins when a homeowner misses a mortgage payment. The lender will typically send the homeowner a notice of default, which informs them that they are in danger of losing their property if they do not bring their mortgage payments up to date. If the homeowner does not take action to resolve the situation, the lender will typically initiate the foreclosure process.
During the pre-foreclosure period, the homeowner will usually have the opportunity to bring their mortgage payments up to date and avoid foreclosure. However, if they are unable to do so, the lender will eventually take possession of the property and sell it at a foreclosure auction.
How Pre-Foreclosure Works
The pre-foreclosure process can be complicated, and it’s essential to understand how it works if you’re a homeowner or an investor looking to purchase a distressed property.
When a homeowner misses a mortgage payment, the lender will typically send them a notice of default. This notice informs the homeowner that they are in danger of losing their home if they do not bring their mortgage payments up to date. The homeowner will then have a certain amount of time to pay off the missed payments and any associated late fees.
If the homeowner is unable to bring their mortgage payments up to date, the lender will typically file a notice of sale with the county recorder’s office. This notice informs the public that the property will be sold at a foreclosure auction. The homeowner will be notified of the sale date, and they will have until the day of the auction to bring their mortgage payments up to date and avoid foreclosure.
If the homeowner is unable to bring their mortgage payments up to date, the property will be sold at a foreclosure auction. The proceeds from the sale will be used to pay off the outstanding mortgage balance, and any excess funds will be returned to the homeowner.
Pre-Foreclosure Timeline
The pre-foreclosure process can take several months to complete, and the timeline can vary depending on the state in which the property is located. However, there are some general timeframes that homeowners should be aware of.
After a homeowner misses a mortgage payment, they will typically receive a notice of default within 30 to 90 days. The notice of default will give the homeowner a certain amount of time to bring their mortgage payments up to date.
If the homeowner is unable to bring their mortgage payments up to date, the lender will typically file a notice of sale with the county recorder’s office. The homeowner will be given at least 21 days’ notice of the sale date.
The foreclosure auction will typically take place between 30 and 90 days after the notice of sale is filed. If the property is sold at the auction, the homeowner will have a certain amount of time to vacate the property before the new owner takes possession.
Pre-Foreclosure vs Foreclosure
It’s essential to understand the difference between pre-foreclosure and foreclosure. Pre-foreclosure is the period between the time a homeowner misses a mortgage payment and the time the property is sold at a foreclosure auction. During this time, the homeowner still technically owns the property, but the lender has initiated the foreclosure process.
Foreclosure, on the other hand, is the legal process of taking possession of a property and selling it at auction to pay off the outstanding mortgage balance. Once a property has been foreclosed, the homeowner is no longer the legal owner and must vacate the property.
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Pre-foreclosure Options for Borrowers
If you’re behind on mortgage payments, you’re likely to receive a “notice of default” from your mortgage lender.
This document will state that you have not made mortgage payments for the last 90-180 days. It’s important not to panic.
You have options that can delay or even prevent losing your home:
- If your mortgage is “above water,” (meaning you have equity in your house) you may be able to refinance your mortgage, receiving lower monthly payments. Check with your local Broken Arrow mortgage broker… or contact us and we can connect you with a reputable one.
- You may be able to quickly sell your home to a real estate investor that’s reputable in Broken Arrow like us at Petit Home Solution, using the cash acquired to pay the months of back-payments owed (or we *may* be able to work out something with the lender that relieves all or part of your back payments. We can buy your Broken Arrow OKLAHOMA area home quickly, often in just a week or two, will pay in cash, and takes the stress out of trying to find a buyer.
- You can contact the bank and ask them to permit a short sale. In a short sale, you’ll sell your home for less than it’s worth, and the bank will take the loss as a tax write-off. In some short sales, you may still be required to pay the difference to the bank if the house doesn’t sell for what is owed on the loan.
- You may be able to declare bankruptcy, which can buy you time to pay your debt. Bankruptcy will remain on your credit report for years and can cause significant damage.
Lenders are very much aware of the widespread financial troubles across the country and they’re willing to work with borrowers a lot of the time.
If you’re honest and communicate with your lender, you’ll often find that there are options that will allow you to remain in your home, or at least salvage your credit rating.
A foreclosure can often negatively affect your credit score by 200-400 points and can prevent you from obtaining a loan of any sort for 5-7 years, so be very dutiful if you’ve received a Notice of Default from your lender.
But if you’re not able to find a solution with your lender working directly with them… connect with us. We may be able to help.
Ways We Can Help If You’re In Pre-Foreclosure
- We can potentially help with a short sale – Submit your info on this website so we can evaluate your situation to see if we can help.
- We can buy your Broken Arrow area house – We buy houses in Broken Arrow and would love to make you an all-cash offer on your house too. Just fill out the form here to get started >>
- You can ask us questions and we can provide you FREE guidance and resources so you can make a well-educated decision. This costs you nothing, there’s absolutely no pressure, no obligation… just free guidance without a catch.
If you’re in the pre-foreclosure stage… you’ve still got time to fix this situation.
Just connect with your bank to see if they’re willing to work with you… or contact us if you’d like to see what we can buy your house for or to tap into our free foreclosure resources.