At the height of the financial crisis in 2010, nearly 3 million homeowners went into foreclosure, according to a report from ATTOM Data Solutions who studies the U.S. housing market. While the country is on the road to recovery, there are still many families struggling to make ends meet when it comes to their mortgage payments.
The number of foreclosures has been falling since 2010, but you may be surprised to learn that there were still over 900,000 homeowners who went through a foreclosure in 2016. That’s approximately 0.7% of all housing units in the United States.
Why Foreclosure Is Such a Big Deal
No matter what type of mortgage you have, they all work the same way: the homeowner agrees to pay back the money they borrowed from the lender in full. But what happens if you are unable to do that? After enough time has elapsed, the home may go into foreclosure.
Foreclosure means that the bank or mortgage lender takes possession of the house and puts it up for sale (or auction) to try and recover some of the money that was lent out to buy the house. The homeowners will be forced to move out prior to the home being sold. The most obvious downside to having your home foreclosed on is that you no longer get to live in it.
While the loss of a primary residence can be disastrous for a family, there are other negative effects of foreclosure as well. Having a foreclosure on your Credit Report can severely affect your ability to buy a different home, as well as your ability to qualify for a rental property. Other lenders and property management companies may refuse to offer you credit after reviewing your credit history, or may charge a higher interest rate due to being a greater risk. It may take several years to restore your credit following a foreclosure.
Causes of Foreclosure
We can see that having a home foreclosed on by a bank is a very bad situation. But how does a homeowner get themselves into trouble in the first place? There are a number of situations that might cause a person to fall behind on their mortgage. Let’s talk about some common scenarios that can cause people to lose their homes. Usually it is not due to one single cause, but the result of multiple factors such as:
- Job loss
- Unexpected injury or disability
- Unforeseen medical expenses
- Death of spouse or partner
- Living a high consumption lifestyle
- Having a high amount of consumer debt and/or student loans
- Having little to no emergency savings fund
If more than one of these things happen within a short period of time, you may find yourself struggling to make the mortgage payment in addition to your regular living expenses. If you are already several months behind, you may be dangerously close to foreclosure. If you have made incomplete payments or stopped making payments entirely, the lender may consider you to be in default on the home loan.
Different Options for Avoiding Foreclosure
What should you do if you find yourself behind on mortgage payments and no options in sight? Whether you are one month or several months behind on mortgage payments, it is very important to consider all of your options before making a big decision. Let’s talk about some of the different choices out there.
Reinstatement – If you pay back the amount owed, you may be reinstated. This often comes with fines and fees though – plus you still have to come up with the money somehow.
Forbearance – If your lending company is kind, they may allow forbearance, where you can make smaller payments or no payments at all for a specific period of time while you get caught up. This is best as a temporary solution.
Another solution many homeowners don’t think of is selling their home to a private company. Organizations such as BuyMyHome can make a cash offer on your house, with fast closing times and no hassle for you! This can get you out of a tough situation with a minimal amount of stress.
Life can throw a curveball at us when we least expect it. If you are behind on your house payments or worried about losing your home to foreclosure, you may consider selling the property to BuyMyHome or following some of the other options listed above. Remember to stay positive and that you can find a way out and turn things around!