5 Myths About Foreclosure

Tuesday, 21 Dec 2010 03:16 PM

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The fear factor associated with foreclosure has led to people not talking openly about this process. This, in turn, has added to the spread of many foreclosure myths. As a result, it has become difficult to differentiate between the myths and facts about foreclosure.
 
Here are five myths about foreclosure:
  • There is a perception that lenders are home-grabbing sharks who are always on the lookout for an opportunity to grab the houses where loan repayments have been defaulted. It is one of the most common foreclosure myths. The truth, however, happens to be something entirely opposite, in most cases. Do not forget that the banks are in the business of giving loans and do not deal in the sale and purchase of houses, which in itself is a costly and time-consuming exercise. The fact remains that banks would make maximum possible effort to avoid a foreclosure and would rather give the homeowner an additional loan to meet the outstanding obligations, rather than grabbing the house at the first available opportunity.
  • Another of the common foreclosure myths relates to home buyers. Many believe that buying a home in foreclosure could be the best bargain, as great houses can be purchased at low prices. However, the risks are really high even for buyers. Getting the tenants out of the property has always been a big risk, while various surveys have found that the price discount is not really much for foreclosure sales.
  • Many people start panicking just at the though of foreclosure and there is a very common myth that the borrower should start packing his goods the moment a foreclosure notice is received. The truth is that foreclosure is really a long process and takes several months in most cases.
  • Many people believe that filing for bankruptcy can save them from the risk of foreclosure. Again, this is nothing but a myth. Bankruptcy, in fact, is a much more difficult process than foreclosure, and in most cases, bankruptcy can only delay the foreclosure or put it on hold temporarily. Besides, a bankruptcy affects your credit score more  than a foreclosure.
  • Another common foreclosure myth has made people believe that a foreclosure notice stops all lenders from giving the borrower a loan and closes all the options for getting out of the situation. The truth, however, remains that a borrower can contact a professional mortgage renegotiator or another lender to find out ways to get the mortgage refinanced and avoid foreclosure. If the borrower has sufficient home equity, there is a good chance to get the refinancing and avoid foreclosure.

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