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Can a home seller sell a home
for less than its mortgage?
ANSWER: Yes, in some case you can sell your
home for less than what you still owe on the mortgage.
But it is complicated and depends on the lender. This
situation is known as a "short sale." Sometimes a lender
will be willing to split the difference between the sale
price and loan amount, which still must be paid.
A short sale may be more complicated if the loan has
been sold to the secondary market because then the
lender will have to get permission from Freddie Mac, the
two major secondary-market players. If the loan was a
low down payment mortgage with private mortgage
insurance, then the lender also must involve the
mortgage insurance company that insured the low-down
loan.
Can I protect my home from creditors?
ANSWER: Your state may provide you with
special protection from creditors through the filing of
a homestead exemption, which exempts some or all of the
value of the owner's equity in the homestead from claims
of unsecured creditors. Deciding whether or not to file
a homestead exemption often depends on an individual's
situation. Contact your county recorder's office for
details.
How bad is a previous foreclosure on credit?
ANSWER: A property foreclosure is one of the
most damaging events in a borrower's credit history. In
terms of the effect on credit history, a deed in lieu of
foreclosure or a short sale is not as adverse an event
as is a forced foreclosure.
How does a home go into foreclosure?
ANSWER: Foreclosure proceedings usually begin
after a borrower has skipped three mortgage payments.
The lender will record a notice of default against the
property. Unless the debt is satisfied, the lender will
foreclose on the mortgage and proceed to set up a
trustee sale.
What happens at a trustee sale?
ANSWER: Trustee sales are advertised in
advance and require an all-cash bid. The sale is usually
conducted by a sheriff, a constable or lawyer acting as
trustee. This kind of sale, which usually attracts savvy
investors, is not for the novice. In a trustee sale, the
lender who holds the first loan on the property starts
the bidding at the amount of the loan being foreclosed.
Successful bidders receive a trustee's deed.
When does foreclosure begin?
ANSWER: Lenders will initiate foreclosure
proceedings when homeowners become delinquent in their
mortgage obligations, usually after three payments are
missed. The lender will then notify the buyer in writing
that he or she is in default. The lender can request a
trustee's sale or a judicial foreclosure, in which the
property is sold at public auction. A borrower can cure
the default by paying the overdue amount and the pending
payment after the notice of default is recorded, usually
no later than a few days before the property's sale.
Some sales allow the successful bidder to take
possession immediately. If the former owner refuses to
vacate the premises, the court can issue an unlawful
detainer that allows the sheriff to come out and evict
them. Borrowers should do everything they can to avoid
foreclosure, which is one of the most damaging events
that can occur in an individual's credit history.
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