If you’re facing foreclosure, you’re not alone: In the United States, there’s been an increase in foreclosure activity over the past few years, which could be thanks to ongoing economic hardship or the high unemployment rate.
Regardless, you are probably stressed and worried about your house and finances. All it takes is a few missed mortgage payments to start the process, and the consequences can be severe.
The good news is that there are options for avoiding foreclosure on your home.
What Is Foreclosure?
Foreclosure is the legal process mortgage lenders, banks, or other servicers use to take possession of a house when borrowers stop making mortgage loan payments.
When someone borrows money from a lender to purchase a property, they agree to make monthly mortgage payments until they have paid back the loan (with interest). If they stop paying for the loan, the lender or bank will start the foreclosure process—generally three to six months after the first missed payment.
When a home is foreclosed on, the homeowner is evicted from the property, and the lender will sell the house at auction in an attempt to recoup their losses. Additionally, the foreclosure is listed on the borrower’s credit report, which causes their credit score to drop significantly.
- How Many Payments Can You Miss Before Foreclosure?
- What Happens When You're Facing Foreclosure?
- What to Do When You're Facing Foreclosure
- Avoiding Foreclosure: 6 Ways to Stop Foreclosure Immediately
- Can I Sell My House When I'm in Foreclosure?
How Many Payments Can You Miss Before Foreclosure?
The number of payments you can miss before facing foreclosure depends on various factors, including your mortgage lender, the terms of your loan agreement, and local laws. Typically, lenders initiate foreclosure proceedings after a borrower has missed several consecutive payments. This could range from two to three missed payments, but it ultimately depends on the specific terms outlined in your mortgage contract and the policies of your lender. It's crucial to communicate with your lender if you're experiencing financial difficulties to explore potential options and avoid foreclosure.
What Happens When You’re Facing Foreclosure?
There are three basic stages of the pre-foreclosure process: you go into default, your lender shows intent to foreclose, and your home goes up for sale at auction.
1. You Go Into Default & Receive Notice
You can technically be in default if you miss just one mortgage payment. Many lenders don’t consider a payment late until after the grace period has ended. However, serious action is not usually taken until there have been 90 days of delinquency.
If your due date and grace period pass without a mortgage payment, your lender will likely charge a late fee and send you a warning. If this happens two months in a row, you may get a demand letter requesting you make up the missed payments or legal action will be taken. You’ll be given some time to come up with the money.
Once you miss three mortgage payments, your bank may issue a notice of default, signaling their intent to initiate the foreclosure process. At this point, you still have a chance to address your delinquency and reinstate your loan. However, after 120 days without payment, your lender can legally begin foreclosure.
2. Your Lender Shows Intent to Foreclose
The court will get involved with your mortgage default if your lender pursues a judicial foreclosure. This is where your bank files a lawsuit against you to repossess your house. Your lender may also have to prove you were offered loss-mitigation options before they filed a lawsuit in court.
You have the right to contest the foreclosure and offer your defense. A judge will review evidence on both sides and possibly hold a hearing. You might even be able to agree to a plan with your lender before the hearing begins. But if no settlement is reached, and the court rules in the bank’s favor, your property can be sold.
A non-judicial foreclosure can move much faster. If your lender pursues this option, they will seek out a foreclosure trustee to move forward. Depending on your state, the bank may only be required to give public notice in the newspaper. If you want to contest a non-judicial foreclosure, you have to file a lawsuit against the lender.
3. Your Home Is Put Up for Sale
A notice of trustee sale will be recorded with the county that includes details about your property as well as the place, date, and time of the sale. The sale must be advertised for a few weeks before the event. The trustee sale is usually done through an auction at the sheriff’s office.
The highest bidder (or buyer most likely to close) will be awarded your home. If there’s no buyer interest, the bank will use other methods to try to sell your house at a later date. Either way, your home is now officially foreclosed, and you will likely be evicted by the new owner or the lender.
What to Do When You’re Facing Foreclosure
Talk to Your Lender
First and foremost, your lender is there to help you, especially if you want to stay in your home. He or she doesn’t want you to lose your house any more than you do and is willing to provide options as they relate to the mortgage.
Most of the time, not being able to make a mortgage payment is the result of a temporary problem in your life like the loss of a job or an illness. There may be options available to help you keep your home such as forbearance, a loan modification, or a repayment plan to catch up on past due payments. Set up a meeting with your lender first so they can give you all the options available to you.
Avoiding Foreclosure: 6 Ways to Stop Foreclosure Immediately
Each state has its own foreclosure laws, so how much time you have to avoid foreclosure depends, in part, on where you live. However, if you are in default on your mortgage payments and foreclosure is moving, it’s best to act as quickly as possible.
Your options for preventing foreclosure will also depend on your financial situation and how much of the mortgage loan you have already paid off.
Here are some ways to stop foreclosure immediately.
1. Work Out a Repayment Plan with Your Lender
If you were facing temporary financial hardship that prevented you from making your mortgage payments but are now able to start paying them again in full, your lender may be willing to work out a payment plan with you. The advantage is that you can pay back the missed loan payments month by month instead of handing over a lump sum. Then, you can avoid foreclosure and start getting back on track.
2. Request a Mortgage Forbearance
A mortgage forbearance is a temporary hold on your monthly mortgage payments. You and your lender agree to a certain amount of time to pause the payments. However, when the forbearance period ends, you will have to pay back all the payments you missed, either as part of a repayment plan or as a lump sum.
3. Apply for a Loan Modification
If lower monthly payments would allow you to prevent foreclosure, you can apply for a loan modification. This process modifies the terms of your mortgage so that you can successfully make the payments. For example, one type of loan modification extends the length of your mortgage, so you have lower monthly payments spread out over more time.
4. Sign a Deed in Lieu of Foreclosure
Another option to avoid foreclosure is to sign a deed in lieu of foreclosure. Some banks, mortgage companies, and other lenders will release you from the obligations of your mortgage if you agree to transfer ownership of the property to them. It is an alternative to an official foreclosure without consequences like a hit to your credit score.
5. File for Bankruptcy
Filing for Chapter 13 or Chapter 7 bankruptcy will impose an automatic stay on your assets and pause the foreclosure process. However, your credit will be severely impacted.
With Chapter 13 bankruptcy, you’re placed on a repayment plan to pay off your late payments, but you get to keep your property. You must have enough income to afford both the late payments and current ones. The plan usually lasts three to five years.
Chapter 7 bankruptcy eliminates your debt and allows a court-appointed trustee to sell your nonexempt property to pay your creditors. A low income is required to qualify for Chapter 7. The process takes around four to six months, then the court will discharge the remaining debt.
Also, with Chapter 7 bankruptcy, if your home was already scheduled for a foreclosure sale, filing will likely postpone the sale for three to four months. However, the lender can file a motion to lift the automatic stay and proceed with the sale.
6. Sell Your Home
Selling your home is one way to prevent foreclosure—and although you will have to leave your house, you will avoid having the foreclosure listed on your credit. There are two common types of sales homeowners use to avoid foreclosing on their property: conducting a short sale or selling the house on their terms.
A short sale is when you sell your house for less than what you owe on your mortgage. The proceeds of the sale go to your lender, and the bank or mortgage company will forgive some (or all) of the balance remaining on your loan. You will need approval from your lender before you can conduct a short sale.
The other possibility is to sell your home on your own terms. If your home is worth more than the remaining balance on your mortgage, then you can sell it, pay off your mortgage, and use any leftover profits to find new housing. Of course, the timeline is challenging here; you will need to sell your house fast—before the foreclosure process starts.
Can I Sell My House When I’m in Foreclosure?
Absolutely!
Until the time your home is sold at auction or the bank takes possession, your house is considered to be in pre-foreclosure. If you hire a real estate agent, they can crunch the numbers to determine how much money you could get for your home and if that would be enough to pay your debt.
Your lender may agree to a short sale because the foreclosure process is such a headache. A short sale is when your lender lets you sell your home for less than you owe. Taking this route means you would avoid foreclosure and bankruptcy—plus your credit would not take a huge hit.
If it has become too much to maintain or you have found yourself in a situation where you can’t pay for it, selling your home for cash might be the best option. It offers two results: you no longer have that huge mortgage to pay, and you can downsize to something more affordable – all without hurting your credit.
When you sell your house for cash, you can sell your home faster than a market listing. This alleviates the headache of the traditional process of selling a home – listing, showings, inspections, and more. At New Again Houses®, we buy houses for a fair cash offer. We'd love to help you find freedom from your old home.
The Best Way to Prevent Foreclosure: Sell Your House Fast for Cash
If you are at risk of foreclosure and can’t work out another option with your lender, you can avoid foreclosure by selling your house for cash.
Cash buyers are individuals or companies that can make an all-cash offer on your home without getting financing from a lender or obtaining a mortgage. When you work with a cash buyer like New Again Houses, you don’t have to worry about finding a realtor, making repairs, staging the home, or getting an appraisal. Instead, cash buyers streamline the buying process and can quickly close the sale.
Selling your home to a cash buyer is a quick and easy way to get your home sold—and quickly. It’s the best way to keep your credit intact and walk away from the house without worrying about any contingencies or obligations. You can efficiently go through the selling process and prevent foreclosure.
Find a reputable, experienced cash buyer in your area and see how they can help you avoid foreclosure.
Avoid Foreclosure & Sell Your Home to the Cash Buyers at New Again Houses
At New Again Houses, we buy, fully remodel, and sell homes to new families to enjoy for years to come. Unlike other cash buyers, we will never sell your contract or your information—so you can trust us to restore your old home and give it the love it needs.
We’ve been in the business of helping local homeowners sell their homes since 2008. Based in Bristol, TN, and serving homeowners nationwide, the New Again Houses team would love the opportunity to invest in the community by making your older home new again.
Together, we transform not only houses but also the lives of our clients.
Are you ready to sell your house, get a cash offer, and close in a matter of days? Contact us today to get started.
