Many homeowners who go through foreclosure are surprised to learn that
they still owe money on their house
, even though they no longer own it! Most mortgage lenders require borrowers to personally guarantee the amount of the note, leaving the lender with two avenues of collection in the foreclosure scenario.
What does an unpaid balance on a foreclosure mean?
The bank can still collect the remaining loan balance unpaid by the house sale. The remaining balance on a mortgage after the collateral sale (the home) is called a
deficiency balance
. The amount frequently exceeds the default borrower's remaining assets and can force him to consider bankruptcy.
Do you pay the remaining balance on a foreclosed home?
When a mortgage loan goes delinquent, the homeowners owe the mortgage balance as of the date of the last mortgage payment they made. … While lenders may recover part of their losses by selling a foreclosed home,
there is likely to be a balance remaining
.
What happens to the equity in a foreclosure?
If you cannot get new financing or sell the home,
the lender can sell the home at auction for whatever price they choose
. If the home does not sell at auction, the lender can sell the home through a real estate agent.
What happens to your money in a foreclosure?
Will I Get Money Back After a Foreclosure Sale? If a foreclosure sale results in excess proceeds, the
lender doesn't get to keep that money
. The lender is entitled to an amount that's sufficient to pay off the outstanding balance of the loan plus the costs associated with the foreclosure and sale—but no more.
Can you squat in a foreclosed home?
Can I squat in my own house if it gets foreclosed on?
No, you cannot
. Someone else will become the owner of the property and then you will be trespassing.
Can you live in a foreclosed home for free?
Once your lender starts to foreclose on your home, you still have the option to live there for at
least several months
. … Until that point, you have the legal right to keep living in your home.
Do I lose all my equity in foreclosure?
Whether you have equity or not, your lender will foreclose on your property if you fail to pay the mortgage. However, having equity could mean coming out of the foreclosure with money in your pocket.
Your lender does not get to keep all the proceeds from the foreclosure auction regardless of the amount
.
Do you lose everything in a foreclosure?
Your lender does not get to keep all the proceeds
from the foreclosure auction regardless of the amount. State statute determines who gets paid and when, but as the homeowner, you are last in line to get paid if there is a surplus.
How soon can I buy a house after foreclosure?
It is unlikely that you will get a mortgage loan within
two years of a foreclosure, since the minimum seasoning, or wait period, is three years. Federal Housing Administration lenders might reduce the wait period to two years if you can show that the foreclosure was caused by a one-time, uncontrollable event.
Why are foreclosed homes so cheap?
Lower prices: One undeniable benefit is that foreclosed
homes almost always cost less than other homes in the area
. This is because they're priced by the lender, who can only make a profit (or get some or all of their money back) if the home gets sold.
Can a bank make a profit on a foreclosure?
When your property becomes the subject of foreclosure,
the bank may benefit from a profit surplus after a foreclosure is completed
. For example, imagine your home was worth $300,000 when you purchased it, and you took out a mortgage loan for $225,000.
What are the consequences of a foreclosure?
Eviction from your home
—you'll lose your home and any equity that you may have established. Stress and uncertainty of not knowing exactly when you will have to leave your home. Damage to your credit—impacting your ability to get new housing, credit, and maybe even potential employment, for many years.
Can I leave stuff in my foreclosed house?
It's a common misconception that you must leave the property when foreclosure starts, but in fact
you can stay in the home right up to the foreclosure auction
. The actual foreclosure may take several months from start to finish. … You may vacate the property if you wish and take all personal property with you.
What should I offer on a foreclosed home?
You should probably make your
initial bid at a price that's at least 20% below the current market price
—perhaps even more if the property you're bidding on is located in an area with a high incidence of foreclosures. If you can pay for the property and any necessary renovations in cash, you're in an enviable position.
Is it illegal to squat in a residential property?
This is illegal
. In California, however, a squatter can't be removed if they provide documentation that is at all convincing. Even though squatters do have rights in general, they can be arrested as a criminal trespasser if they do not fulfill the requirements for adverse possession
