Foreclosure will affect your life much longer than the actual process itself takes. The impact to your credit will remain for years after you’ve lost your home. Foreclosure is never a good option for homeowners who are falling behind on mortgage payments but, unfortunately, sometimes foreclosure becomes the only option.
You can still possibly prevent foreclosure if you are willing to be up front with your bank and let them know exactly where you stand financially when it looks like you’re going to default, or start missing payments. Loan modification is also a tool to help you recover from a close call, and involves adjusting the terms of your loan, such as interest rates and monthly payments, or could even mean adding missed payments to the tail of the mortgage.
Some banks, in the interest of avoiding foreclosures with their properties, will agree to sell a house quickly for less than its market value. This is called a short sale. It can stop foreclosure, but its probably more beneficial to the bank than it is to you. It acts very similarly to a foreclosure in terms of reducing your credit score, though a short sale will mean that you could be eligible to buy a home again much sooner.
If you find there’s absolutely nothing you can do to prevent foreclosure, then be prepared for the following process to unfold:
The bank will send you a Notice of Default shortly after you miss your first payment ” usually after 30 days.
Shortly after this (at 60 days post missed payment), the lender will contact you to encourage any payment amount to help keep you current on your loan.
If you make no payments after 90 days, then the bank will commence unstoppable foreclosure proceedings.
The property is then sold at a foreclosure auction. After the sale you have two options: Either leave at your own free will or wait for the Sheriff to come and evict you.