What Does It Mean to Be Released From Foreclosure?
You can be released from a foreclosure. A foreclosure happens when get behind on your home loan payments and your mortgage defaults. RealtyTrac, an online marketplace established in the 1990s to specialize in foreclosed properties, noted there are four basic ways to get out of foreclosure, with one alternative allowing you to keep your home by making all the late payments during a grace period (pre-foreclosure) specified by your state.
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Process
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To better understand your options, you need to understand the foreclosure process. According to the National Association of Realtors' HouseLogic website, there are five basic stages. Your bank or lender contacts you, outlining the number of months you are behind on payment. From there, you receive a written notice of foreclosure. This is the point where you have to decide how to move forward. If you move forward with the process, your property is put up for auction, at which time it can be sold, and you'll later receive an eviction notice.
Reinstatement
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There are opportunities to keep your home during the process. You can work out an arrangement with your bank or lender in which your loan is reinstated. At this point, the lender gives you a deadline to make your back payments, which is based on your state's specific laws, according to RealtyTrac. If you get on track with your payments, your loan is no longer in default, you can keep your house and you're out of the foreclosure process.
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Sale
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If you can't make your payments during the grace period, you can still minimize the impact your late payments will have on your credit score. According to RealtyTrac, after receiving an official notice of default, you can decide to sell your home during that grace or pre-foreclosure period. You can then take the earnings from the sale of the home and pay off the bank or lender. In this way, you'll escape having a foreclosure on your credit report, which will significantly damage your score.
Short Sale
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The NAR reports that a short sale can be a win-win for lender and borrower. This option happens when the lender takes ownership of the home from the borrower, and works out an arrangement with the borrower to resell the property. In this case, lenders accept less than the mortgage amount from the borrower. There are two ways this can happen. Sometimes, the difference is waived by the bank, and other times, an arrangement is worked out to pay the debt over a specified period of time. This option costs the lender less than a foreclosure, and again doesn't hurt the borrower's credit as much as a foreclosure, according to the NAR.
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