Understanding Foreclosure Words and Terms
If it’s your first time learning about buying or investing in foreclosed homes, chances are you’re going to hear a lot of unfamiliar technical terms and buzzwords. Here are some of the more common terms you’ll encounter:
Appraisal – a document which states the property’s fair market value. It is based on the sales of comparable homes in the area and needed by a lender to determine the mortgage amount.
Balloon Loan – also known as an adjustable rate mortgage. This type of loan offers a low rate for a period of time, and then increases. A buyer has the option to pay the balance (balloon payment) or refinance.
Complaint – before a lawuit is filed, a complaint must be prepared, outlining the details of all claims of the person raising the suit.
Deed-in-Lieu – to avoid foreclosure proceedings, a homeowner can voluntarily relinquish all claims on a property by giving the deed to the lender.
Default – when payments have not been remitted after 60 to 90 days, a loan is considered in default. After this time, a lender must send a default notice and can begin foreclosure procedures.
Delinquency – failure to make timely payments. Any payment made after the time period (usually 15 days) can be assessed with a late fee.
Eviction – Eviction proceedings are taken out before forcibly removing someone from occupying a home.
Forbearance – If a borrower is late in making payments, a lender can decide not to take legal action and give forbearance. Both sides must agree on a plan to make payments current.
Lien – any legal claim made against a property. All liens must be settles before it is sold.
Loan Modification – in lieu of a refinance, a lender can agree to change the terms of a loan.
Mortgage Interest Deduction – a tax break for homeowners. If the mortgage interest is deemed large enough to be itemized, it can be considered a deduction when filing taxes.
Predatory Loan – any lending practice which is abusive, such as charging high interest and fees each time a loan is refinanced or giving a mortgage loan to someone who doesn’t have the ability to pay.
Pre-foreclosure sale (short sale) – in order to satisfy a loan, a borrower may sell a property for less than what is owed, rather then going into foreclosure. Know More On foreclosure listings.
Redemption Period – after a foreclosure sale, the borrower can still redeem the home within a specific time period, if he or she can pay the balance and all costs and fees.
Underwater – mortgages that are worth more than the actual current value of the home (based on market value)
Know more on:reo foreclosure list and Reo Properties for sale