How to Foreclose on Homes

House in Foreclosure

If you are in a financial position where you are no longer able to make your mortgage payments, then foreclosure is the next action that will happen. The bank gave you a loan and you promised to pay a set amount as a payment against the mortgage. When you stop paying, the agreement is broken. They have the legal right to take the house from you as collateral for the unpaid loan. This process is called foreclosure. There are several things you should be doing when you get into this situation.

Instructions

1. Free up as much of your money as you can. This means cutting back on everything possible in your budget. It is better to sit in the dark because you used the utility money to help pay your mortgage than to lose your house. Sell your car, walk or take the bus, eat at home instead of eating out, have a friend cut your hair instead of a salon, and do everything within your power to make the mortgage payment on time. If you have done all this and still cannot collect enough cash, it's time to move to the next step.

2. Call your bank. Tell them your predicament. They really would like for you to pay off your loan, and have no use for a house. They might be willing to offer you some help. Some banks will give you a window to get back on your feet, postponing payments for 3 to 6 months with no penalties. They will usually have some good advice for you depending on how poor your finances are.

3. Put your house on the market. Drop the selling price as low as you can go. When you get to the stage of foreclosure, you have to realize that you must play hardball to keep this from really hurting your credit and wiping out your finances. Banks will often agree to take a fraction of the mortgaged amount when they find out you have a potential buyer. They might fight a little on their end since they want to be paid as much of the money owed as they can, but they will negotiate.

4. Talk to a bankruptcy lawyer. He will tell you exactly what you need to do and the risks involved in going bankrupt. Sometimes it is better to ruin your credit by going bankrupt and to have most of your debts paid off, including your mortgage, than to go into foreclosure and still have to pay all your other debts. Realize that back taxes and college loans will not be cleared through bankruptcy, and that most states require you to go through credit counseling before declaring. It will cost you to go bankrupt, but it will help control how bad your finances can get when you are facing foreclosure.

5. Call your bank loan officer again and tell him everything you have done. Banks are often involved with investors who may be willing to buy out your mortgage and keep the house as an income-producing rental property. The bank will most likely hold off the foreclosure process as long as possible, especially if they know you are actively working on getting their money.

6. Don't move out when you find that you cannot pay. It may be months to years before the foreclosure actually goes through. During this time, work on getting your finances back in order and never think it is too late to call the bank to see if they have anything to offer. For the sake of your neighborhood, keep your property maintained and even try to improve it to help it to sell. Keep your taxes paid so the house doesn't go into a tax sale. It is your home until the bank tells you it is time to get out.

Resources

• Lawyers.com