When Can a Bank Foreclose?
Losing a job, unusual expenses or a combination of the two can cause you to fall behind on your house payment. While this may happen occasionally, when can a bank foreclose on your home? There are several factors that come into consideration before a bank will foreclose on your house. Understanding these factors and knowing what the purpose of a bank foreclosure is will help you stay away from this situation.
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Function
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When a borrower from a bank cannot keep up with the payments, the lending bank is forced to take legal action by seizing the property and re-selling it to recoup its losses. When a bank lends you money, they are allowing you to purchase a home, but the main goal of the bank is to gain a profit through interest payments. If you stop making payments on your loan, or "defaulting" on your financial agreement, the bank begins losing money and thus in order to keep its business running, your home can be foreclosed and resold.
Time Frame
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The lending institution can begin the foreclosure process anywhere from 3 to 6 months after you miss a payment. Throughout the duration of this time, you must repeatedly miss payments in order for the foreclosure to begin. After your home has been officially foreclosed, it will go up for sale at a sheriff auction normally located at the courthouse. Once your home has been re-sold, eviction can come as quickly as two weeks or as long as forty-five days.
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Effects
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A bank foreclosure affects your entire financial life. Once the foreclosure is finalized, all money that you have paid on your home is lost. Damage to your credit from a foreclosure will last at least seven years, and throughout this time, you may not be able to obtain loans for housing or vehicles.
Prevention/Solution
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Communicating with your bank can delay your foreclosure by months. Working out payment plans and keeping them informed about your financial situation will give you extra time to prevent the forthcoming foreclosure. At the first sign of financial problems, meet with a loss mitigation councilor immediately to prevent a foreclosure from occurring.
Potential
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Undergoing a bank foreclosure can not only damage your credit, but also your ability to sustain a steady living environment. The risk of a lawsuit from your mortgage company is also quite high when you undergo a foreclosure. With the costs of attorneys and other fees from your bank, a foreclosure has the potential to damage your financial future.
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