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Foreclosure Basics

Foreclosure can be a scary process. The thought of losing your home, especially when your health is compromised, can make you feel powerless. However, this need not be the case.

The best advice is to avoid the foreclosure process entirely by continuing to make your mortgage payments as long as you are able. Missing just one mortgage payment can:

  • Affect your credit history and lower your credit score by as much as 100 points.
  • Lead to future higher interest rates.

The terms of your mortgage note will state how many payments you can miss before your lender begins foreclosure proceedings, but generally your lender will not begin foreclosure proceedings until you have missed at least two months of payments.

How does foreclosure affect your credit score?

Significantly. If your home is foreclosed on, your credit score may be lowered by 175-300 points, depending on the amount of missed payments. A foreclosure typically remains on your credit report for five to seven years. Consider the following if your home is about to be foreclosed on.

What is the foreclosure process?

Sometimes, you may have no choice other than to allow your home to be foreclosed on. The foreclosure process can vary based on the terms of your loan and the laws in your state, but generally it proceeds as follows:

  • The lender will send you a Notice of Default, which is a written letter, stating that you have not complied with the terms of your mortgage.
  • You will be given a period of time in which you can make payments to bring your mortgage current. By failing to do so, the lender can obtain a court order that will allow them to sell your property.
  • If the terms of your mortgage allow for it, a trustee also may be given the ability to sell your property.
  • In accordance with the terms of the court order or the note, you will be given a Notice of Sale, which states the date and time of the sale of your home.
  • At any time until the date of the sale, you can make a payment to become current on your mortgage in order to avoid the sale and retain ownership of your home.
  • If you are still living in the home at the time of the sale, the lender may begin eviction proceedings against you.

What are your state's laws concerning foreclosure?

They vary from state to state. In some states, foreclosure will conclude in a few months and in others, more than a year. Each state's laws are different concerning the length of time and number of payments that must be missed before the lender can begin foreclosure proceedings. Use the map below to find foreclosure information in your state.

Your goal should be to delay or avoid foreclosure for as long as possible to allow your financial situation to improve. To achieve this, consider working with your lender or making alternative financing arrangements.