Shelter over our heads is one of the human basic needs. Most of us prefer to purchase a home over renting. Therefore, having the freedom to make decisions within the home while building equity. However, life may come at us fast with unforeseen obstacles. Whether you recently lost a loved one, employment, or the ability to work. There are unexpected issues that may arise, forcing us to fall behind on our bills, mortgage, or taxes, leading to foreclosures in Philadelphia. The foreclosure process can be a nightmare with both short and long-term effects. In this article, we will explain the effects of foreclosure and ways to avoid foreclosure in Philadelphia Pennsylvania.
Main Forms of Foreclosures in Philadelphia PA
Foreclosure is the legal process in which a lender or city takes possession of your property due to a lack of payment. Two common types of foreclosure are tax foreclosure and mortgage foreclosure. The lender or city will take control of the property, selling the home to recoup the unpaid balances. There are different ways to address each form of foreclosure. Although the concept is simple, catch up on your payments before you need to petition the court and go through more difficult proceedings.
Real Estate Tax Foreclosures in Philadelphia
If you fall behind on your real estate taxes in Philadelphia, your property becomes delinquent. Therefore, after two years of missed payments, you run the risk of losing your property to foreclosure. The amount due for yearly property taxes in Philadelphia is based on your assessed property value. In addition, the payment must be submitted by March 31st to avoid penalties and interest.
The real estate taxes help fund Philadelphia’s school district, public safety, roads, along public parks and buildings. If you feel like your property taxes are excessive in Philly, you can apply for a review to reevaluate your property assessment. Never fall behind on your property tax; they are an essential function for our city. Additionally, the city won’t hesitate to place a lien on your home and eventually take full possession.
Understanding Mortgage Foreclosures
The difference between property tax foreclosure and mortgage foreclosures in Philadelphia. The real estate taxes owed to the city, while the mortgage owed to a private lender. The time frame it takes to lose your property after missed payments is drastically different. Mortgage payments due every month, while property tax owed once a year. When you miss four consecutive mortgage payments, you’re subjected to foreclosure.
If life comes at you fast, and you begin to fall behind on your payments. Being vocal with clear communication with the lender or mortgage company can make all the difference. However, each lender has different loan terms; it’s vital to refer back to your term sheet to fully understand what’s expected from you. Foreclosures have long-lasting effects; do whatever it takes to avoid foreclosure and stay up to date with your monthly payments.
Impacts of Foreclosure in Philadelphia
Short-term effects of Foreclosures in Philadelphia
- The most massive issues associated with foreclosures are losing housing stability. When experiencing the foreclosure process, you’ll be displaced from your home. Therefore, struggle to find another place to stay because of a lack of funds, which got you into this situation from the start.
- Huge impact on your credit score. A completed foreclosure may drop an individual’s credit score by at least one hundred points. Having a foreclosure on your record may prevent another home loan, or even a personal loan, such as a car loan.
- Additional expenses such as late fees, extra interest, processing fees, and court fees quickly accumulate. Which can take years to fully handle.
- Relationship issues. Facing foreclosure is an extremely stressful process that can cause strain on a family and their relationships. Financial difficulties lead to shame and disagreements, which can be harmful in the short and long term.
Long-term impacts of Foreclosure
- Loss of any equity that you had built up over the years.
- Long-term challenges with receiving a line of credit. If approved for a loan in the future, it can result in lower loan amounts and much higher interest rates.
- Increased dependence on government funding. If you fall drastically behind on your bills, you become less sufficient with an increased need for help, which can lead to a strain on available funds and programs.
- Might be required to use a co-signer for any future loans.
- Lack of ability to get further home loans. Additionally, with a foreclosure on your record, it becomes difficult to get accepted to rent a property.
- Strain on your mental wellbeing and overall stress. Facing foreclosures in Philadelphia can lead to many sleepless nights, which can negatively impact your health.
How to Avoid Foreclosures in Philadelphia
- Budget your income and expenses. Like the old saying, a penny saved equal to a penny earned. Most individuals are on a fixed income, so it’s vital to put a portion aside to handle your property taxes and mortgage payments.
- Work multiple jobs. We’re put on this earth to enjoy life, not work multiple jobs, consuming most of our time. However, at times, we have no other option but to work multiple jobs to ensure the bills are paid on time.
- Rent out a spare bedroom. If you have an extra bedroom in your home, consider renting it out to help make ends meet and stay up-to-date with your taxes and mortgage.
- Loan Modifications or Refinance. If you have the funds for closing costs, consider refinancing your mortgage to a lower interest rate.
- Government assistance, such as HAF (Homeowner Assistance Fund) or HUD-approved housing counseling. These programs can help homeowners make ends meet with funding or teach them the techniques to properly handle their mortgage payments or taxes. In addition, Philadelphia has a program dedicated to helping with foreclosure prevention. The program’s called “City of Philadelphia’s Foreclosure Prevention Program,” considering foreclosures not only affect the homeowner. It also puts a strain on the entire community.
- An alternative route to avoid foreclosure, losing your house, and having your credit greatly impacted is to consider a short sale. These sales allow the homeowner to clear their name of debt without facing the consequences of foreclosure.
- When facing pre-foreclosure, consider selling the property to avoid the negative effects of the foreclosure process. If that time comes, reach out to a licensed Philadelphia real estate agent to receive the experience and knowledge for the best results.
Importance of Preventing Foreclosures in Philadelphia
Foreclosure is a serious legal process that affects the homeowner, the city, and the community. The results of a foreclosure in Philadelphia can essentially ruin an individual’s life, making it nearly impossible to receive another loan. The effects of foreclosure are both short-term and long-term. At times, foreclosures can prevent people from renting property, obtaining a car loan, or even a credit card. However, foreclosures impact beyond just the homeowner. Property taxes are established to fund city programs such as public playgrounds and libraries, in addition to schools and public safety. Without proper funding, these programs may be limited or forced to shut down.
A homeowner should do whatever it takes to avoid foreclosures, whether it’s renting out a bedroom or selling the home. Never feel overwhelmed when falling behind on your mortgage or taxes. There are ways to prevent foreclosures in Philadelphia or minimize the effects. Put your pride and shame aside and feel free to reach out for help when life hits you hard. Furthermore, there are programs and professionals with experience in these situations who can provide advice to help navigate these challenging times.