What Causes a Home to Reach Foreclosure?

foreclosureForeclosure is the process by which a lender takes back ownership of a property from whomever borrowed money to purchase the property. This occurs when the borrower no longer makes the mortgage loan payments on time. So what causes someone to reach foreclosure on their home?

Arizona operates as a title theory state, which means that the lender holds the title to the property until the underlying loan obligation is paid in full. This gives the lender the right to foreclose on the property if the borrower defaults on the loan. The primary method of foreclosure in Arizona is known as non-judicial foreclosure, meaning that foreclosure does not involve a court action but requires notice commonly called foreclosure by advertisement.

Last year in Arizona, 34,387 properties completed foreclosure. This number may seem high, but with the market slowly turning up, the Phoenix-Mesa-Glendale housing market showed a decline in foreclosure rates in 2013, and that number is predicted to decline even further. This figure can be intimidating to those interested in keeping their home or even buying a new one, but there are plenty of reasons why someone could succumb to foreclosure besides just living beyond their means.

Negative Equity plays a major part in leading to foreclosure. This is where the borrower owes more on their loan than the house is worth. Since lenders will very rarely give a higher loan than the actual worth of the house, negative equity occurs when the price of the house drops, most likely from an economic downturn. Homeowners with equity have options if they run into financial trouble, such as refinancing. Foreclosure is typically the only option that homeowners without equity have.

There are a lot of factors that could contribute to a foreclosure that has nothing to do with the housing market. An illness or death in the family, especially occurring with the head of the household, can quickly result in a foreclosure if the mortgage is left unpaid due to other financial obligations. Divorce can play a major factor in a foreclosure, but the most common situation is when someone refuses to leave and the other refuses to pay the mortgage.

If you find yourself in the midst of a foreclosure, AllHomesAZ.com can help. At All Homes AZ, all consultations for foreclosures in Phoenix are free. No matter the situation, we will work with you to help settle your foreclosure at no cost. Please contact us today and get cash for your home – in any condition – in as little as three days!

Comments are closed.