Foreclosure and preforeclosure are two terms that are commonly used in the real estate industry. Although they sound very similar, they are actually quite different and can have implications for both homeowners and potential buyers.
What is Foreclosure?
Foreclosure is a legal process that occurs when a homeowner is unable to make their mortgage payments. When a San Diego homeowner falls behind on their mortgage payments, the lender can initiate foreclosure proceedings, which can ultimately result in the loss of the home. When you are in a foreclosure, it can have lasting consequences on your credit score and can make it very hard to get a future loan.
What is Preforeclosure?
Preforeclosure, on the other hand, is a period of time before foreclosure proceedings have begun. During preforeclosure, the San Diego homeowner has fallen behind on their mortgage payments, but the lender has not yet initiated the foreclosure process. When you are in the preforclosure phase, it can give the homeowners a chance to find a solution to their money woes, like a loan modification or a short sale.
One of the main differences between foreclosure and preforeclosure is the timeline. Foreclosure is a lengthy legal process that can take months or even years to complete. During this time, the homeowner may have the opportunity to stay in their San Diego home and make arrangements to catch up on their mortgage payments. However, when the foreclosure period has ended, the homeowner is forced to vacate the home.
Preforeclosure, on the other hand, is a much shorter period of time. Typically, preforeclosure lasts only a few months before the lender initiates foreclosure proceedings. During this time, the homeowner may have the opportunity to work with their lender to find a solution to their financial difficulties. Now, if a solution is not found, the homeowner may lose their home.
Long Term Effects
Another key difference between foreclosure and preforeclosure is the impact on the homeowner’s credit score. Foreclosure is a serious event that can have a significant negative impact on a San Diego homeowner’s credit score. This can make it difficult to obtain future loans or credit, and can also result in higher interest rates and fees.
Preforeclosure, on the other hand, may have less of an impact on the homeowner’s credit score. Falling behind on mortgage payments is obviously not a great idea and can have lasting consequences on your credit, but if you work with a lender to find a solution during preforeclosure, it can help you find a light at the end of the tunnel.
Buying Properties in Foreclosure or Preforeclosure
For potential buyers, there are also important differences between foreclosure and preforeclosure. Foreclosed properties are typically sold at auction, and buyers must be prepared to pay cash or obtain financing quickly in order to purchase the property. Additionally, buyers may need to deal with issues such as liens, unpaid taxes, or evictions.
Preforeclosed properties, on the other hand, may be available for sale through a short sale. During a short sale, the San Diego homeowner sells the property for less than the amount owed on the mortgage, and the lender agrees to accept the proceeds as payment in full. Although short sales can be a good option in this situation, it can be a very lengthy and time consuming process, and not to mention, unpredictable.
Foreclosure and preforeclosure are two distinct terms that have different implications for homeowners and potential buyers. Foreclosure is a legal process that can result in the loss of a home and can have long-lasting negative effects on a homeowner’s credit score. Preforeclosure, on the other hand, is a period of time before foreclosure proceedings have begun that can give homeowners an opportunity to work with their lender to find a solution to their financial difficulties. For potential buyers, foreclosed properties are typically sold at auction, while preforeclosed properties may be available for sale through a short sale. Being informed about the differences between foreclosure and preforeclosure in San Diego can help homeowners and buyers make the right decision for their situation.
What Are My Options?
To stop your house from going into foreclosure, you will need to find a way to get the income to afford your mortgage or you need to get rid of the home. Frankly, owning your home shouldn’t feel like a struggle each month. You should be able to feel confident in the ownership of your home. If your mortgage has become too much to handle, it may be time for you to find an alternate solution.
How Trusted House Buyers Can Help With Foreclosure
If you are struggling with your monthly mortgage in San Diego, Trusted House Buyers is able to buy your property outright. We will make you an offer and close on the property when you are ready. At Trusted House Buyers, we help people get out of tricky situations in the fastest and most stress-fee way possible. If you are struggling with a house you can no longer afford, reach out to our team today to learn more about the options available to you. We are happy to answer any questions you have about the process. 619-786-0973.