I was going through my hard drive and found this old article that I wrote a while ago. I get occassional emails about some really basic stuff about foreclosures. So I thought why not post this here although I think majority of this blog readers probably know this already. But just in case....

What is A Foreclosure

Simply defined, you bought a house for yourself, you financed the bulk of the price of the home, may be you put some money down. But still the money borrowed constitutes the bulk of what your house is worth.

Example: Mary and John just got married and decided to buy a house for themselves. They found a cute little house near their jobs and fell in love it. The asking price for the house was $100,000 and they decided to buy the house. They got a loan from their local credit union for $95,000 and they put down $5,000 from their own savings.

If Mary and John were to miss paying their mortgage payments, the credit union, under the law, has the right to take the house away from them, irrespective of what they put down on the house or how much they have paid the mortgage down to. The credit union will take the house away and sell it in the open market via a realtor to recoup their money invested in their mortgage.

The process of taking a home away from somebody who is failing to make payments on their mortgage is called a foreclosure.