| Purchase a Second Home before Losing the First to Foreclosure |
Some homeowners, when facing the threat of a potential financial hardship, decide that their current house is just too expensive and will most likely become a target of foreclosure. The homeowners may not be behind yet, but they know there will be a loss of income or their mortgage payment will reset to a higher payment that they can not afford. So, there is often a tendency to purchase a new, smaller home before the crisis occurs and allow the old home to be taken away by foreclosure. In some cases, this is not such a bad idea. However, this is a decision that needs to be carefully considered and its outcome will depend on how quickly the homeowners can close on buying the new home. If they are already missing mortgage payments, then it will be difficult, if not impossible, to qualify for a new home loan. But if their credit still allows them to qualify for a mortgage, then they may want to attempt to get the new house as soon as possible and begin making a transition to a more affordable lifestyle.
Once homeowners start missing payments on the old house, the foreclosure process will start (especially if they planning on letting it go into foreclosure and are doing nothing to gain foreclosure advice or seek out options to save their home). The bank will sell the house at a sheriff sale, and the new owners will be able to evict the foreclosure victims and anything that is left in the old house. Purchasing a new house after this process has begun will be impossible due to the foreclosure status of the old house and the negative effect on one's credit after several mortgage payments go unpaid.
Foreclosure victims should also be concerned about the danger of the bank suing them after foreclosure and trying to take the new house or attach a lien to it. If the house does not sell at sheriff sale for an amount to pay off the defaulted loan plus the extra foreclosure costs and late fees, the bank may be able to sue for a deficiency judgment and come after any other assets owned by the former homeowners. The bank will have to proceed with a new lawsuit after the foreclosure process is over, though, which will cost them additional time and resources.
However, banks almost never sue their former homeowners, because they know that homeowners face foreclosure because they are unable to continue paying the mortgage, and the mortgage company will not be able to collect on the judgment anyway. It costs them more time and money to sue the foreclosure victims and obtain a judgment, and there is little chance they will get the money in the end. At this point, most banks would rather prepare the foreclosure property to be sold on the open market and make their money back that way, rather than chase after a few hundred or thousand dollars, at most, from the former homeowners.
Not every state allows deficiency judgments after foreclosure, so homeowners spend some time researching their state foreclosure laws. There may be no danger at all after the foreclosure of the old house, and homeowners can close on a deal to purchase a new home before the foreclosure is even an issue. This is a bit of an underhanded technique to obtain a second home while intending to let the old house go into foreclosure, but homeowners who know they will not be able to afford a higher payment or will lose a portion of their income soon have a responsibility to plan for their own future and the future of their families. This whole method does raise moral questions, of course, which homeowners must answer in the context of their own family's long-term financial health.
Purchasing a new home to bail out on a mortgage that will soon be too expensive can often provide homeowners with additional benefits in terms of their credit, as well. With two mortgages, the late payments and foreclosure of the first house will not drag down the homeowners' credit scores as much as if they owned only one home. This can offset some of the devastating effects of foreclosure and allow foreclosure victims to obtain new credit in a much shorter time than if their only home was foreclosed. If homeowners understand the moral and financial consequences of such an action, this method of avoiding becoming a former homeowner can give families a great head start on the road to financial recovery despite a very recent foreclosure.
The ForeclosureFish.com website helps homeowners avoid foreclosure by providing them with relevant information and advice they can use to put together a plan to save their homes on their own. Visit the site today to learn more about foreclosure and download a free e-book explaining the basics of the foreclosure process: http://www.foreclosurefish.com/
Article Source: UnArchived Articles
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