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.
Even though it may feel embarrassing or uncomfortable, you can typically keep the banker away by being honest and upfront about why you are missing mortgage payments. Often a banker who knows more information is more willing to work out a deal. Loan modification should be your first option. This is where the bank adjusts certain terms of your loan such as your interest rate and monthly payment to a point where it is affordable for you to make your monthly payment. Alternatively, the bank may add any 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 sends out a Notice of Default after the first missed payment.
Expect your phone to start ringing where trained collection phone agents try and get you to pay even modest sums towards the default amount.
If you make no payments after 90 days, then the bank will commence unstoppable foreclosure proceedings.
After 180 days of being in default your home could go into an auction. Once the house is sold to the highest bidder, you can leave the property. Or, you will be evicted.
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