Facing missed mortgage payments? Understanding the legal journey from pre-foreclosure to foreclosure can empower you to make informed decisions about your Charlotte home and how to avoid going into pre-foreclosure. It’s crucial to understand the difference especially if you’re experiencing financial difficulties or considering buying a property at either stage.
What is Foreclosure?
Foreclosure is a legal process in which the bank takes possession due to the homeowner’s failure to resolve delinquency within the specified timeframe. The lender then becomes the legal owner of the property and typically sells it at auction. The proceeds from the sale are used to pay off the mortgage debt, and any remaining balance becomes the homeowner’s debt.
Charlotte homeowners have limited options in this situation, including renting the property back from the lender or negotiating a cash-for-keys agreement. The timeframe for the bank to take back the house varies by state, and the homeowner should take immediate action to resolve any delinquency. Defaulting on your mortgage is a serious event that can have long-lasting consequences for Charlotte homeowners, including damage to their credit score and difficulty obtaining future loans.
What is Pre-foreclosure?
When a Charlotte homeowner misses mortgage payments for 90 days, the bank can issue a “notice of default” to inform the homeowner of a potential forced sale. However, the homeowner still legally owns the property during the pre-foreclosure period. The borrower has a few options to save their home from a forced sale. They can catch up on missed payments, work with the lender to modify the loan, sell the property privately or through a short sale, or file for bankruptcy (which may delay foreclosure but can damage their credit score).
Foreclosure (approximately 120 days):
- Day 120: If the delinquency persists, the lender can file a foreclosure lawsuit in court.
- Days 120-140: Court schedules a hearing for the lender to present their case. The borrower receives a notice of hearing at least 20 days before.
- Day 140 (or after the hearing): If the court rules in favor of the lender, they approve the foreclosure sale.
- Days 140-160: The property is advertised for sale for at least three weeks. This usually involves posting a notice of sale at the courthouse and publishing it in a local newspaper.
- Day 160: Sale takes place, typically at the courthouse steps. The highest bidder wins the property.
- Days 160-170: Upset bid period: Other interested parties have 10 days to submit higher bids on the property. Each new bid triggers a new 10-day upset bid period.
- Day 170 onwards: If no further bids are received, the sale becomes final, and the deed is transferred to the new owner. The previous homeowner has 20-30 days to vacate the property.
Pre-foreclosure can be as short as a few months or up to a year. The preforeclosure starts once you have fallen behind on your mortgage and ends with the forced sale of your home. In North Carolina, the law requires the lender to notify the borrower by mail a notice of default that includes the amount due and available resources to avoid losing your home. They must also mail you a notice of default at least 45 days before filing a foreclosure proceeding.
Long Term Effects
Another key difference is the impact on the homeowner’s credit score. The repossession of your home is a serious event that can have a significant negative impact on a homeowner’s credit score. This can make it difficult to obtain future loans or credit and result in higher interest rates and fees.
Preforeclosure, on the other hand, may have less of an impact on the homeowner’s credit score. While falling behind on mortgage payments can still have a negative effect on credit, working with the lender to find a solution during preforeclosure can help mitigate some of the damage.
Buying Properties in Foreclosure or Pre-foreclosure
For potential buyers, there are also important differences between foreclosure and preforeclosure. Foreclosed properties are typically sold at auction, and buyers must be prepared to pay cash or obtain financing quickly in order to purchase the property. Additionally, buyers may need to deal with issues such as liens, unpaid taxes, or evictions.
Pre-foreclosed properties in Charlotte, on the other hand, may be available for sale through a short sale. During a short sale, the homeowner sells the property for less than the amount owed on the mortgage, and the lender agrees to accept the proceeds as payment in full. Short sales can be a good option for buyers who are looking for a deal, but they can also be time-consuming and unpredictable.
What Are My Options
Seek advice from a HUD-approved housing counselor on understanding your rights and options. They can guide you in understanding your options such as:
- Catch up on missed payments: If you can manage, bringing your mortgage current is the most straightforward way to stop foreclosure. Contact your lender immediately to discuss options and explore potential hardship programs.
- Loan modification: Negotiate with your lender to modify your loan terms, potentially reducing your monthly payment or extending the loan term. This requires documentation of your financial hardship.
- Forbearance: Request a temporary pause on your mortgage payments for a set period. This offers short-term relief but still requires repayment later.
- Refinance: If eligible, refinancing your mortgage with a lower interest rate could decrease your monthly payment. Explore market rates and lender options.
- Sell your home: Selling your property, even through a short sale (selling for less than owed), can prevent the forced sale of your home and potentially leave you with some proceeds. Seek guidance from a realtor experienced in short sales.
Alternatives to Foreclosure:
- Deed-in-lieu of foreclosure: Transfer your property’s ownership directly to the lender in exchange for releasing your mortgage debt. This avoids the forced sale proceedings but can impact your credit score.
- Chapter 13 bankruptcy: Filing for Chapter 13 allows you to restructure your debts and propose a repayment plan under court protection. This can temporarily halt the repossession of property but has long-term financial implications.
How JMS Home Buyers LLC Can Help With Foreclosure
If you struggle with your monthly mortgage, JMS Home Buyers can buy your property outright. We will make you an offer and close on the property when you are ready. We help Charlotte homeowners get out of their difficult situations. If you are struggling with a house you can no longer afford, reach out to our team today to learn more about the options available to you. We are happy to answer any questions you have about the process. 704-707-6016