3 Common Misconceptions about Foreclosure

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Home foreclosure can be a devastating event for you and your family. When the bank has to foreclose on your home, it can damage your credit and your financial future. You will be forced to find a new home which can uproot your way of life. With a topic that has so many negative connotations, there can be many misconceptions about it. Dealing with a foreclosure properly requires that you have the right information. Here are a few popular misconceptions about a foreclosure.

1. Nothing Can Be Done
Many people mistakenly believe that nothing can be done once your mortgage goes into default. They think that once it gets there, they are past the point of no return. This could not be further from the truth. Many homes are saved after they have already gone into default status. Many times you can negotiate with the bank and modify your existing loan. This is a far superior option over foreclosure. You might have to take a small hit on your credit file, but in the long run, you get to keep your house. Just remember that you should not give up on your house just because you get a foreclosure notice in the mail.

2. Banks Want Your Home
Many people who are unaware of the foreclosure process and the banking industry think that banks are out to get your house. They believe that banks will take every opportunity they can to get your house and then resell it. The truth is, banks do not like to deal with real estate. They are set up to make money by lending to people. They are not set up to be real estate agents or investors. This means that they would prefer to never foreclose on a house and simply collect their interest. However, when people do not make their payments as agreed upon, they have no choice but to take back the house and cut their losses. Do not ever think that the bank is out to get your house. In reality, they want to keep you in your house as much as you want to stay in it.

3. The Entire Mortgage Balance is Due
This is a very common misconception that many people believe after getting a default status notification in the mail. The letter will usually say something to the effect that your mortgage balance is now due in full. This is called an acceleration clause and they are asking for the entire amount of the loan. Many people believe that the only way they can keep their home is to do what the note says and pay the loan. There is no "option B" presented to them on the paperwork. However, you can still negotiate with the lender and get your mortgage back in good standing at that point.