How the Credit Crunch Can Affect You
Just so I know the worst-case scenario, what happens in a foreclosure?
It's a long process, and it varies from place to place. But the basic chronology is that you fall behind on payments and become delinquent (usually after 90 days of nonpayment). Your lender then starts foreclosure proceedings, usually through the county public trustee, and if you don't pay up, the house is repossessed and you get evicted. (This process, too, can stretch on for six months or more.) Eventually, the county sells your property at a public auction. If no one bids more than is owed on the mortgage, the lender steps in and buys it for the cost of the outstanding mortgage, then tries to resell it. Yet even after the auction, most homeowners are allowed more time (usually another 75 days) to make good on the loan and buy the house back—plus interest and penalties.
And if I can't come up with the money to buy it back?
Then it's gone, your credit score plummets even further than it already has, and your chances of securing another home loan, auto loan, or even a credit card, are dramatically reduced—at least for the next seven years that the black mark appears on your credit history.