In Houston, Texas, banks or lenders have a legal right to foreclose on a home if the owner has missed mortgage payments. By doing so, they will regain the money that is owed to them by selling the property.

In extreme foreclosure cases, the property may not be worth enough to completely cover one's debt to the lender. In this case, not only will their property be taken away from them but they will also have the outstanding balance due to the lender.

Types of Foreclosures

In Houston there are two types of foreclosures that will ensue, should the lender decide to go through with proceedings. The first type is a "deed in lieu of foreclosure," to pay for the missed mortgage payments. This type of foreclosure will be agreed upon in a contract between the homeowner and the lender. The more common type of foreclosure is when the property goes to auction that is overseen by a court officer. This type of foreclosure will allow the homeowner to keep any equity that they have built in the home.

Because a foreclosure on a house or other piece of property reflects so negatively on a person's credit report, it's important that homeowners avoid foreclosure. Houston banks and lending companies will send notices to the homeowner once a mortgage payment has been missed.

Alternatives to Foreclosing

Once a notice is received, it's important that the homeowner contact the lender to arrange for payment to be made. Houston lenders can be very understanding and will often review the homeowner's financial situation before making any drastic decisions. Lenders don't usually want to foreclose either as it means the added cost and time of selling the home themselves. Therefore, the homeowner and the lender should work together to devise a plan that does not include foreclosure.

In many areas, a "fast sale" or "short sale" are options where the home owner can sell their home (sometimes for less than they actually owe the bank) and walk away from their obligation. Sellers should consult with an experienced Realtor to help them understand the local market conditions and the best methods to explore this possibility.

A Partial Claim is an option that will give the homeowner an interest-free loan. This loan will be used to cover the mortgage payments and the lender will often work for the homeowner in helping them get this loan. To qualify, the homeowner must have missed at least four mortgage payments, but not exceeded twelve missed payments. The loan needs to be obtained before the home is in foreclosure status and the homeowner needs to be able to begin making payments in full immediately.

Special Forbearance is a process in which the lender and homeowner will meet and attempt to make an arrangement that is suitable to both of them for repaying the loan. The lending company is often the main force in these discussions and the options available will greatly depend on them.

Bankruptcy is a common alternative to foreclosure. Although bankruptcy does show as a large negative on a credit report, it is better than foreclosure. Because this is such a drastic step, homeowners need to speak to a lawyer before they make the final decision.

Many homeowners also choose to sell the property on their own if their home is nearing, or already in, foreclosure. There are many different aspects of selling a home when it is near foreclosure and so it's important to hire a real estate agent that has experience dealing with these types of sales.

Of course, the easiest way to avoid foreclosure on a property is to never be placed into that position to begin with. Unforeseen expenses may pop up from time to time but it is the homeowner's responsibility to contact the lender to make them aware of the situation and to work with them to devise a payment arrangement.

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