The Stages of the Foreclosure Process

The process of foreclosure comes with a few stages and the entire process can take months from start to finish. While the foreclosure process may look different in each state, it generally starts when you default on mortgage payments. After that, if you continue not to pay your mortgage, your lender will send you a notice of intent to foreclose. Next, there will be a foreclosure filing and maybe a court hearing. You may have the chance to contest the action and even raise defenses. In other states, your lender can foreclose on the property without any judicial intervention. Eventually, you'll lose your home because the property will be sold and you'll be evicted.

Foreclosure can have a lasting impact on your family and your finances, so take the time to understand the stages of foreclosure so you can take steps to prevent it from happening. And if you do go through a foreclosure, learn how you can find housing and help to get your finances back in order.

Stages of Foreclosure

The exact foreclosure process is different in each state, but generally, you can expect it to look something like this:

• Default and notice of default
• Foreclosure filing and trial
• Notice of sale and sale of property
• Eviction
  

Default and Notice of Default

The first thing that happens in the foreclosure process is that you enter into default. Defaulting on your loan essentially means you’re late on your mortgage payments—what most lenders refer to as being delinquent.

The law dictates that a lender must reach out once you're 36 days behind on mortgage payments. By 45 days, the lender must provide written notice of the default, including details about any loss mitigation or repayment options that you may be able to use.

You need to be at least 120 days behind on your mortgage for the lender to start the foreclosure process legally.

Foreclosure Filing and Trial

If you’re in a judicial foreclosure state, the next step is foreclosure filing. The lender will file a foreclosure lawsuit against you, also called a “complaint.” In some states, lenders need to prove that they offered you loss-mitigation options before filing suit. 

The foreclosure suit will go before the court and you have a right to contest the foreclosure and raise defenses. If the court rules in favor of the lender, the property can be scheduled for sale.

Notice of Foreclosure, Sale 

In nonjudicial foreclosure states, there is no trial. Lenders simply issue a “notice of intent to foreclose,” alerting you that the foreclosure process has begun. They will also need to advertise the sale for at least a few weeks before the scheduled sale date.

The property's actual selling is done via auction, and usually by the local sheriff’s department. In many cases, banks and lenders are forced to purchase the properties back due to a lack of buyer interest. 

These are then dubbed “bank-owned properties” or “real estate-owned properties” (REOs), and the lender then makes efforts to sell those directly to a buyer. Many banks and larger financial institutions list their REO properties somewhere on their website. For example, Wells Fargo has a site dedicated to REO and bank-owned homes.

Eviction

Once your foreclosed property has been sold, you must vacate the premises. If you don’t, the new buyer legally can have you evicted from the home. The eviction process varies by state.

What To Do After the Foreclosure Process

Foreclosure is not an easy thing to go through—financially or emotionally. If you've gone through the stages of the foreclosure process and have lost your home, it's important to know there is help out there for you and your family.

First, you may not be able to buy another home right away when you go through foreclosure. Some lenders have waiting periods of a few years. If you have extenuating circumstances, you may be able to buy sooner. If not, it may be best to rent an apartment or house until you can buy again.

If you're in the middle of the foreclosure process, see if you can secure a rental before the foreclosure is complete. This may allow you to rent before the foreclosure shows up on your credit report.

If you foreclosed because you lost your job or didn't have enough money to make the mortgage payments, see if you can secure a higher paying job or at least some type of employment to begin getting your finances back on track. A co-signer may also be the best way to secure housing after you go through foreclosure—this can be a family member or friend who has strong credit.

Lastly, consider talking openly about the foreclosure with someone you trust. If you need legal advice, consult a lawyer. And if you need someone to talk to, see if your insurance covers therapy.

Frequently Asked Questions (FAQs)