Separating myths from facts can be difficult, especially when you’re faced with conflicting and contradictory information about foreclosures and the foreclosure realty market. Whether you want to start off with an investment business or you’re a distressed homeowner who is on the verge of facing foreclosure, you should be aware of the foreclosure myths along with the hard facts. The fear factor that is usually associated with the process of foreclosure has led to people not discussing openly about the process. Nevertheless, here are some foreclosure myths that you may take into account.
Myth No. 1: Lenders are home-grabbing sharks
Fact: There’s an usual perception among the struggling homeowners that the lenders are no less than home-grabbing sharks who are looking for an opportunity to seize those houses where loan repayments have been defaulted. This is one of the most popular foreclosure myths but the truth is something entire opposite to the misperception. The banks are in the business of lending loans and aren’t there to interfere in the sale and purchase of houses, which is a pretty time-consuming process. Hence, the fact is that the banks would make the maximum possible effort to avert the chaos of a foreclosure and rather offer additional opportunities to the homeowners for meeting their outstanding obligations.
Myth No.2: Foreclosures occur in poor-income areas
Fact: No, this is not the fact as foreclosure is a process that takes place among low-income to million-dollar properties. Economic forces like plummeting home values and plunging interest rates affect the homeowners from all kinds of neighborhoods. Therefore, it is not that foreclosures occur only in poor-income areas, they are equally common among middle-class and higher-income families.
Myth No.3: Once you start getting letters, it’s all over
Fact: Most homeowners are scared of the foreclosure letters and they think that once they start getting letters, it’s all over for them. No wonder the wording and the red letters are daunting, but this doesn’t signal the end of the world. There’s still time to figure out an alternative repayment plan, income-based payment plan or a forbearance option. Just make sure you furnish all the necessary documents like your income stubs, tax forms and your tax returns. There’s always a room for discussions even if you’ve started receiving foreclosure letters.
Myth No.4: Since you can’t continue with the payments, you’re doomed
Fact: When you fail to make systematic payments towards your mortgage loan, the worst-case scenario might be that of declaring bankruptcy but that doesn’t mean that you will lose your house automatically. Although declaring yourself as a bankrupt will give you a breathing room but you still have to deal with the bank. There are multiple ways to negotiate the payments and also halt them as per requirement. Mitigating circumstances like job loss, illness or unforeseen disasters also play a vital role in helping you negotiate an alternative.
Myth No.5: Buying a foreclosure home is perhaps the best bargain
Fact: There are many who believe that purchasing a home in foreclosure could be the best bet as it’s possible to buy some great houses at a diminished price. However, there are really high risks for the buyers like getting the tenants out of the property. While one might think that obtaining a foreclosure property will help you save your dollars, yet various surveys have found out that the price discount isn’t considerable enough for foreclosure sales.
Myth No.6: Foreclosure will trash you credit score forever
Fact: Most struggling homeowners wonder that they won’t be able to take out a loan ever again but this is nothing but a myth. Yes, it might be a fact that rebuilding your credit post foreclosure will certainly be difficult but it isn’t impossible. Foreclosure stays on your report for the next 7 years and will then fall off. You might have to deal with bigger down payments due to your present credit status but the trick is to be patient so that you can budget carefully to manage the loans and pay off your existing loans and thereby improve your credit gradually.
Myth No.7: Mostly foreclosures are in despair
Fact: Yes although it’s true that some foreclosures can be less than the ideal shape, many are in great condition. This myth that most foreclosures are in despair seems to be driven by another myth that foreclosures are usually caused due to financial irresponsibility. There are many homeowners who find themselves delinquent and they encounter situations that are out of control. Even then, this doesn’t detrimentally affect the condition of your property. Nevertheless, if you aren’t an expert in purchasing foreclosure properties, you can seek help of an expert.
Myth No.8: Buying foreclosures is only meant for professional investors
Fact: Perhaps this may have been the case previously but with all the tools that are available in today’s market, more people than ever before will have the opportunity to buy foreclosure properties. One can use different resources to track the online foreclosure database and potential buyers can look for properties that are up for auction. Buyers can also take a safer side and find real estate agents who are familiar with the ins and outs of the foreclosure real estate market.
Hence, if you’re someone who is about to invest in foreclosure properties or bank owned houses, or someone who is facing an impending foreclosure, you should ensure separating the foreclosure myths from the facts before taking the plunge. Foreclosure is a legal process, which if gone wrong, can trash your credit score. Get help of an agent to avoid silly mistakes.