This varies from state to state and lender to lender, but most lenders don't start foreclosure proceedings until you've missed several payments. Before taking back your house, a lender might rather rewrite the loan, suspend principal payments for a while (have you pay interest only), reduce your payments, or even let you miss a few payments and spread them out over time.
If your loan is owned by one of the giant U.S. mortgage holders, Fannie Mae or Freddie Mac, foreclosure could come even more slowly. Fannie Mae and Freddie Mac often work with homeowners to avoid foreclosure when a loan is delinquent.
If your loan is insured by a federal agency such as the Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the Veterans Administration (VA), or the Farmers Home Administration (FmHA), the lender may be required to try to help you avoid foreclosure. Contact the federal agency to find out more.
You might be better off just selling you house than having it go to foreclosure. If you can find a buyer who will offer to pay at least what you owe your lender, take the offer. If the offer is for less than you owe your lender, your lender can block the sale. But many lenders will agree to a "short sale"-one that brings in less than you owe the lender-and agree to forgo the rest. Some lenders require documentation that you are experiencing financial or medical hardship
before they will agree to a short sale.
If you get no offers for your house or the lender won't approve a short sale, you can walk away from your house. To do this, you transfer your ownership interest in your home to the lender using a deed in lieu of foreclosure. Keep in mind that with a deed in lieu, you won't get any cash back, even if you have lots of equity in your home. The deed in lieu may also appear on your credit report as a negative mark. If you opt for a deed in lieu, try to get concessions from the lender-after all, you are saving it the expense and hassle of foreclosing on your home. For example, ask the lender to eliminate negative references on your credit report or give you more time to stay in the house.
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