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How long do you have before missed payments lead to foreclosure?

On Behalf of | Jul 20, 2021 | Bankruptcy

You have to have a solid income, a substantial savings account and a decent credit score to qualify for a mortgage. Typically, you will have to show years of reliable payments made on rental properties or other lines of credit as well to prove that you know how to budget and pay your bills.

Although your creditworthiness helps convince the mortgage lender to offer you financing, your home is the collateral that secures your mortgage. All it takes is a bitter divorce, finding a lump or an accident at work for your finances to suddenly slip out of your control.

When you don’t have income, you may not be able to pay any of your bills. How long after you fall behind on your mortgage will your lender be able to foreclose on the property and take it from you?

Every mortgage has its own unique terms

There is no set requirement for when a lender can initiate foreclosure proceedings. Instead, the timeline stems from a combination of the lender’s internal policy and the conditions set in the mortgage instrument you signed.

According to industry records, the average length of time it takes a lender to initiate foreclosure is four missed payments. However, different companies have different policies about foreclosure, with some being far more aggressive. Small mortgage companies and owners who finance their own properties may initiate foreclosure after just a single missed payment. Many lenders expect you to pay all the missed payments at once to catch up on the past-due amount.

When you receive a foreclosure notice, you have a limited opportunity to respond

Unlike a vehicle repossession, which lenders can initiate without any forewarning, foreclosure can only occur when you have received a warning and the opportunity to catch up on your obligations. As soon as your lender advises you that foreclosure is imminent, you have to start thinking about how to defend your property and the investment you have made against foreclosure.

Filing for personal bankruptcy can temporarily halt foreclosure efforts and might put you in a position to renegotiate the terms of your mortgage with the lender so that you can keep your property and eventually catch up on those missed payments. Exploring how bankruptcy can help those struggling with their mortgages could help you protect your biggest investment.