Facing foreclosure is an emotional process. Unless you can get caught up on your mortgage payments or refinance the house to more affordable payments, you will have to leave the foreclosure eventually. However, you don't have to leave as soon as you receive a notice from your bank that the foreclosure is imminent.
State laws regarding foreclosure vary, but in all states, the lender must notify you in writing that your house payments are past due and that you have a certain amount of time -- often 21 to 30 days -- to get caught up. If you don't make your payments during that time, you'll receive another letter saying your home is going into foreclosure. The letter states when the house will be auctioned, which is the date the bank takes back ownership if no one buys the home. The letter must give you 15 to 30 days notice of the auction, depending on your state regulation. In some areas, the auction sale is final, while in others, you have a few days to cure the loan after the auction occurs. During this entire process, you can stay in your home.
Although some states allow foreclosures to occur in less than 60 days from the past-due letter, many banks don't work that quickly. Some banks become inundated with foreclosures and can take months to process the paperwork on yours and send it to auction. In some cases, you receive the auction date notice, but then the lender stalls the foreclosure and puts it on hold without providing you a new auction date while it reevaluates your property and its investment potential. Receiving a notice of foreclosure doesn't mean your house will be foreclosed on quickly. Until a new owner tells you to leave, you can stay in your home.
When You Must Leave
It might seem scary to live in your home during foreclosure, especially when you have no idea when the process will be complete. The downside is that you won't know exactly when you'll have to move out, but the upside is you don't have to make a house payment during that time and you can save that money. You don't have to leave the house until after the auction is final and a new owner comes to take possession of your home. The owner might be the bank, but it could be an individual investor. Even if the new owner asks you to leave immediately, he can't force you out without going through a legal eviction procedure. This often takes two months or more, during which time you can look for a new place to live and move out before the eviction is complete.
Why You Should Stay
Waiting for the auction to be final leaves your moving date open-ended, which can be stressful even though you're saving money by not having to pay your monthly mortgage. However, staying in the home until you're positive it's owned by someone else can be to your advantage. If you abandon the home during the foreclosure process and the bank stalls, you're still on the hook for homeowner's association fees and fines as well as the property taxes. These can turn into liens on the property, which can show up on your credit report and keep you from being able to rent elsewhere. Without upkeep, the home and the yard can turn into neighborhood eyesores quickly, reducing the value of nearby homes. If you stay in the home payment-free -- making tax and HOA dues payments as necessary -- until it's owned by the bank or someone else, you can save money, do your neighbors a favor and keep yourself out of future legal trouble from unpaid liens.
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