What is a Foreclosure?

Many people find themselves asking, 'what is a foreclosure?' Foreclosure is a process by which a lender regains a property in which they financed. Usually this is because the person who bought the home isn't making the regular mortgage payments. When you are foreclosed upon you must move out of your house. There is a legal time frame from when you first become late on your payments, until the time they can actually take your home from you. It varies by state, so we suggest a consultation to discuss your specific situation.

Foreclosure will negatively affect your credit for 7 years from last date of activity. This means if the foreclosure starts Jan 1st 2007 and gets completed June 1st 2007, you would have that negative mark until June 1st 2014.

In many states the lender may seek a deficiency judgment. This happens when the bank sells the house for less than you owe on it. The difference between the sales price and the mortgage amount would be filed as a deficiency judgment (only if is it negative). For example, say you owned a house worth $100,000 and you lost your job and stopped making payments. Your current mortgage on the house is $95,000. The bank puts the house on the market after foreclosure and only gets $80,000. The difference, which would be filed as a deficiency judgment against you, would be $15,000. You'd have to pay the $15,000.

Learn more about the causes of foreclosure