Despite the apparent similarity between the two concepts, pre-foreclosure and foreclosure are the names of different processes. We frequently come across these two terms in the real estate industry and their implications diverge both for homeowners and buyers. Let’s delve a little deeper to understand what is pre–foreclosure versus foreclosure in Houston.
What is Pre-foreclosure Versus Foreclosure In Houston?
Foreclosure is the name of a legal process that allows a lender to reclaim their property from a homeowner who falls behind on mortgage payments. Once it is back in the lender’s possession, they sell the property at an auction to recover the outstanding debt. Hence, foreclosure is a serious event, and its effects go beyond losing your home, including damaging your credit score and facing difficulty obtaining future loans. Pre-foreclosure refers to the time period preceding the initiation of foreclosure proceedings. When you are 90 days behind on your mortgage payments, the bank sends you a notice of default.
The bank gives you another 90 days to make up for your missing payments and reinstate your loan. Within this window period, homeowners can collaborate with their lender to sort out ways to resolve their financial hardships through loan modification, etc.
If you consider pre-foreclosure versus foreclosure in Houston, the former allows homeowners to engage in proactive measures to regain financial stability. In this way, good strategies during pre-foreclosure mitigate the adverse consequences associated with foreclosure.
To understand more about pre-foreclosure versus foreclosure in Houston, just go through these:
- The timeline: One main difference between the two is the timeline. Usually, pre-foreclosure lasts only for a few months before the foreclosure proceedings start. While foreclosure, once started, can take months or even years to complete.
- After-effects: Another thing that differentiates between pre-foreclosure and foreclosure is their effects on homeowners’ credit scores. Foreclosure is more destructive because it damages the homeowner’s credit standing, making it difficult to seek future loans. On the other hand, pre-foreclosure still causes some credit repercussions, but these are milder.
- Property purchase: There is a difference in the sale of properties in pre-foreclosure versus foreclosure in Houston. Foreclosed properties are commonly sold through auctions, while pre-foreclosed properties are through a short sale. Foreclosed properties necessitate buyers to be ready with cash or quick financing. In a short sale, the homeowner gets the consent of the lender to sell their property below the outstanding mortgage, which the lender considers a full payment.
Pre-foreclosure Versus Short Sale in Houston
When you are dealing with the property, you often confuse pre-foreclosure and short sale with each other. If you wonder what is pre-foreclosure versus a short sale in Houston, then it’s worth mentioning that both are not same.
During the pre-foreclosure period that precedes the process of foreclosure, the property still legally belongs to the owner. It may or may not be the reason for a short sale. While a short sale is when the homeowner owes more in mortgage than the property’s actual market value; hence, the owner asks the bank to accept a short payoff of the loan. While analyzing pre-foreclosure versus a short sale in Houston, it’s important to note that a short sale may not always occur in the event of pre-foreclosure. In a short sale, the homeowner asks the bank to let them sell the property for less than what they owe.
However, contrary to its name, a short sale does not close over a short period. It can take between six months and one year to close. It is frustrating for a homeowner to accept an offer on a short sale without any guarantee of the deal closing if the lender is not satisfied with the sale price.
Protecting Your Home In Pre-Foreclosure Versus Foreclosure In Houston
After understanding what is pre-foreclosure versus foreclosure in Houston, you may be interested in learning how to protect your home while confronting any of these situations. Well, there are two main ways for homeowners to avoid foreclosure; either to sell the property to sustain mortgage payments or to increase their income. A third way is to reach out to your lender to get some assistance in the form of forbearance options, loan modifications, or repayment plans. Also, if you are struggling with your monthly mortgage, Move On House Buyers can buy your property right there. Before you confront the difficult situation of pre-foreclosure or foreclosure, we can make an offer and close on your property when you are ready, and that too with a fair all-cash offer. Don’t entangle yourself in the legal process of foreclosure; reach out to Move On House Buyers to get good deals for you.