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.
To prevent a foreclosure keep in mind that the banker is making the decision on whether to proceed with the proceedings or give you another chance to make good on the note. That is why you will get better results by being upfront with your lender. Loan modification is the best remedy. You can adjust your interest rates and/or lower your monthly payment making your mortgage affordable.
If loan modification doesn’t work, you may consider a short sale. This is when a bank agrees to sell a house quickly for less than its market value. It can prevent foreclosure, but its probably better for the bank than it is to you because the short sale mitigates the bank’s loss, but wreaks havoc on your credit reports. It acts very similarly to a foreclosure in terms of reducing your FICO score, though a short sale will mean that you could be able to buy a home again much sooner.
If you do nothing and take no effort to work with your bank, then don’t be surprised when they begin foreclosure proceedings. Here is what will happen:
After you miss the first payment you will get a Notice of Default in the mail.
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.