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Foreclosure is the legal process a loan provider uses to take ownership of your house if you default on a mortgage loan. It's costly to go through the foreclosure procedure and causes long-term damage to your credit history and financial profile.
Right now it's reasonably uncommon for homes to enter into foreclosure. However, it is essential to understand the foreclosure procedure so that, if the worst takes place, you know how to endure it - which you can still go on to prosper.
Foreclosure definition: What is it?
When you take out a mortgage, you're agreeing to use your home as collateral for the loan. If you fail to make prompt payments, your lender can take back your home and sell it to recoup some of its money. Foreclosure guidelines set out precisely how a creditor can do this, but also supply some rights and securities for the homeowner.
At the end of the foreclosure procedure, your home is repossessed and you should vacate.
How much are foreclosure costs?
The average property owner stands to pay around $12,500 in foreclosure costs and costs, according to information from the Consumer Financial Protection Bureau (CFPB).
The foreclosure procedure and timeline
It takes around 2 years typically to complete the foreclosure process, according to information covering foreclosure filings during the third quarter of 2024 from ATTOM. However, non-judicial foreclosures can take just a few months.
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Understanding the foreclosure process
Typically, your lender can't start foreclosure unless you're at least 120 days behind on your mortgage payments - this is understood as the pre-foreclosure duration.
During those 120 days, your loan provider is also needed to provide "loss mitigation" choices - these are alternative plans for how you can capture up on your mortgage and/or fix the circumstance with as little damage to your credit and finances as possible.
Examples of common loss mitigation choices:
- Repayment plan
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