The foreclosure process explained: everything you need to know as a homeowner

The foreclosure process explained: everything you need to know as a homeowner

Facing the foreclosure process head on 

No one wants to deal with possible foreclosure, but the reality is that many people do. When income loss or health issues strike, or if a personal situation affects your ability to make payments, it can seem unavoidable. But no matter what your situation might be, you should understand what it is, how it works, and how it affects you, as well as what you can do to possibly avoid foreclosure altogether.

What is foreclosure? 

Foreclosure is the legal process of a lender reclaiming a borrower’s property when they fail to make payments on their home loan. Depending on your state laws and the type of loan you have, the foreclosure process can be initiated with as few as three months of missed payments. It generally starts with the lender filing a notice of default with the relevant authority and notifying the borrower that if payments are not met, foreclosure proceedings will begin. 


Types of foreclosure 

Residential mortgages generally fall into two categories: judicial and nonjudicial foreclosures. Judicial foreclosures require lenders to go through courts before repossessing and reselling a property; nonjudicial foreclosures allow lenders to skip court proceedings and go straight to repossession and sale.  

Judicial Foreclosure 

Judicial foreclosure is a lengthy and expensive process in which the lender files a lawsuit, and it involves court proceedings and the filing of legal documents. This foreclosure process tends to take longer than non-judicial, due to going through the courts. Judicial foreclosure can occur in all 50 states and is required in the following states: Arkansas, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina, Vermont, Virginia, and Wisconsin. 

Non-judicial foreclosure 

This type of foreclosure process, also known as power of sale or statutory foreclosure, occurs when there is a clause in the mortgage agreement that allows lenders to take over ownership without going through judicial court proceedings or giving homeowners time for redemption. Non-judicial foreclosure is usually less expensive than judicial foreclosure and can happen very quickly, potentially within days or weeks. It is practiced in the following states: Alabama, Alaska, Arizona, California, Colorado, Georgia, Hawaii, Idaho, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, North Carolina, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, and Wyoming.  

Strict foreclosure 

This is a rarer foreclosure process. In strict foreclosure, the lender of mortgage services gives the homeowners notice of default by filing a lawsuit against the borrower and asks them to come up with a payment plan or potential solution before they repossess the property. Strict foreclosures are only practiced in Connecticut and Vermont. 

The foreclosure process timeline 

When a homeowner misses their mortgage payment, the lender has a legal responsibility to take action in order to recover the amount owed and protect the property in question. The timeline of events following the missed payment vary between states, but generally follows this pattern: 

30 days late:  

After 30 days of being late on mortgage payments, the lender will typically contact the homeowner to work out some kind of repayment plan or attempt to recoup what’s owed. The lender may also choose to add late fees and other penalties at this stage. 

60 days late:  

After 60 days of not making a mortgage payment, foreclosure proceedings will usually begin. At this point, if the loan is not paid off or if an acceptable arrangement between parties can’t be reached, late fees are accrued. A foreclosure notice of payment is sent out requesting the delinquent fees and additional late fees, which you will have 30 days to pay.  

90 days late:  

After 90 days of not meeting loan obligations (in most states), foreclosure proceedings are well underway, and a notice of default is issued. After this notice is sent out, the home is considered to be in pre-foreclosure. During this time, payments may still be made to stop the foreclosure process.  

120 days late:  

At 120 days late on mortgage payments, the homeowner is deep into the foreclosure process and likely headed toward losing their home. Depending on state regulations, they may still have an opportunity to save their house by working out a repayment plan with their lender or seeking alternatives, such as refinancing or filing for bankruptcy. However, if all else fails, then they may face eviction or have their house auctioned off by the lender.

How the foreclosure process differs state by state 

Laws vary from state to state, so it’s important for homeowners to know which type of process applies to their situation. Since most mortgages are granted and managed by lenders at the state level, each has different rules, regulations, and timelines for foreclosure. 

For example, some states require lenders to go through a lengthy judicial process before they can foreclose on a property, while others only require paperwork filing. Some states have imposed additional time periods where lenders must try other methods of debt relief before proceeding with foreclosure. 

How does foreclosure affect you? 

A foreclosure has a negative impact on your credit history, and for up to seven years after its completion, you may have difficulty when applying for any future mortgages.  

However, regardless of the type of foreclosure you go through, its impact is so great that it will take some time before you’ll be able to secure a loan. Typically, a lender requires that two to three years have passed since the date of the completion of foreclosure before they consider issuing another loan.

Ways to avoid foreclosure 

Although it can seem like an inevitable outcome for homeowners who cannot meet mortgage payments, there are still options available for avoiding foreclosure. The sooner you get in contact with your lender, the better. 

Deed-in-lieu of foreclosure 

A deed-in-lieu of foreclosure occurs when you voluntarily relinquish the deed of your property back to the lender in order to avoid foreclosure. Any remaining unpaid debt is cancelled; this won’t be reported on your credit report and can be less damaging to your credit score. You’ll still have to find a new house, though. 


If this is allowed by your lender, it will pause or significantly reduce mortgage payments during periods of financial hardship.  

Loan modification 

Loan modification is a negotiation between the homeowner and the lender to change one or more terms of the mortgage agreement. This could mean a lower monthly payment or a longer loan term. Your lender may be willing to make changes like these to avoid foreclosure.  

Repayment plans 

A repayment plan can be negotiated with your lender, which allows you to catch up on missed payments by making extra payments over an extended period of time. The goal is usually to pay back what’s owed while also keeping up with current mortgage payments.  

Short sale 

A short sale is when your lender agrees to accept less than what is owed on your loan to avoid foreclosure. It involves listing your house for sale and providing evidence that you cannot afford the property anymore, such as proof of income or job loss. This is usually a last-resort option for homeowners. 

Skip the foreclosure process with We Buy Ugly Houses®

One way to avoid the foreclosure process altogether is to sell your home directly to a cash home buyer that works with foreclosed properties, like We Buy Ugly Houses®. We may be able to help you sell your house in enough time to avoid foreclosure, and ideally help you have funds left over to go toward your next home purchase.  

When you sell to us, the deal can be closed quickly with our 3-step process, often in as little as 3 weeks, or longer if you need more time. This makes it an ideal option for those who don’t have the time or resources for a quick home sale during the lengthy, damaging foreclosure process. 

Here are some additional benefits of selling your house to We Buy Ugly Houses: 

  • You get paid in full in one lump sum, with no extra fees or commissions. And we pay all typical closing costs, so you don’t even need to have any money for the sale. 

  • You don’t have to worry about finding a real estate agent or making any repairs on your property before you sell to another buyer, since we buy “as is.”  

  • You can close very quickly, so you can move on with your life and leave this chapter behind you. 

Need foreclosure help? Call us now at 866-200-6475 or fill out our online contact form and get in touch with one of our experts to find out how you can avoid an impending foreclosure!