What is a foreclosure?

According to The American Heritage dictionary, foreclose is defined as: 1. To deprive (a mortgagor) of the right to save mortgaged property, as when he has failed in his payments. Foreclosure is defined as: 1. The act of foreclosing, especially a legal proceeding by which a mortgage is foreclosed.





In layman's expressions foreclosure is when a borrower fails to generate payments on his or her house and the bank takes action to protect their loan. How does foreclosure happen?





When someone buys a home they commonly finance the purchase. In other words, they borrow money.





There are two parties involved in this transaction. There is a lender, also called the mortgagee and there is a borrower, also called the mortgagor. The lender loans the borrower money to pay for their home and, in turn, the borrower gives the lender a promissory note to repay the borrowed sum of money.





Now, the next step is the lender has to safeguard their loan amount, so they use the house as collateral. The mortgage becomes what is called a lien on the property. That house can't be sold with clear title until that lien is paid off. The promissory note is a assurance that the borrower will pay the lender back in a timely fashion and as stipulated in the note.





Note: Some states use what are called Trust Deeds as opposed to a mortgage. This newsletter is focusing on properties with a mortgage as the lien.





When a borrower does not adhere to the provisions of the agreement, meaning they don't make their payments, the lender starts the foreclosure process in order to recoup their money. Typically, a borrower must be 90 days behind in order for the lender to the start the foreclosure process.





This means the borrower has not made payments in approximately three months. The borrower is said to be in arrears at this stage. They owe the lender the 3 months of payments plus interest. The lender, under the terms of the primary agreement, has the justification to call the balance of the loan due immediately.





This begins the foreclosure process. If the borrower does not pay the lender the money, the house will go to public auction and will be sold to the highest bidder.



Today there are record numbers of foreclosures occurring all across the country. It is an unprecedented time in our history, one primed for investors to take advantage and profit wildly. And I'm not talking about one of those funny schemes from a few years ago where you use your credit to finance the purchase of a home you can't afford.



If you've been a good steward of your money, you need to hop on this gravy train before it dries up for good! There are ways for you to get started with no money out of your own pocket as well! Just visit my site and you can watch a free video to find out how...





About the author:



Jason Hornung is the owner of www.Buy-fore-closures.Com If you are interested in becoming a foreclosure property investor, visit his site today!