What is a foreclosure? When a homeowner doesn’t pay his or her mortgage for an extended period, the bank or entity that lent that money takes possession of the home—which means the current owner must move out.
Foreclosure is a scary word for homeowners, but it’s not all that common today: According to CoreLogic, the foreclosure rate (meaning the percentage of loans in foreclosure) currently hovers just under 1%. During economic downturns, like the housing crisis of 2011, foreclosure rates rose as high as 3.6%.
If you’re struggling to make your mortgage payments, you’ll want to know what foreclosure means and how it works. Here’s what you need to know.
1. What is pre-foreclosure?
If you’re a few days late on a mortgage payment, don’t panic—the bank isn’t going to confiscate your house. In fact, most mortgage contracts have a 15-day grace period, with a late fee of 5% on