Foreclosure Timeline: After You Miss Your First Payment
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If you have decided that you’ll ultimately have to give up your house because your mortgage payments are no longer affordable (if they ever were), the first step toward benefiting from your foreclosure is to stop making your mortgage payments. Open up a savings account in which to deposit as much as possible of the extra money you now have.
Don’t forget about modifications. Before bailing out on your home, find out whether you qualify for a refinance or a mortgage payment reduction under the Making Home Affordable program.
Depending on where you live, and your lender’s policy regarding foreclosures, you likely will be able to miss your payments for at least three months (very possibly as many as five months) before your lender starts formal foreclosure proceedings. In all but a couple of states (check our Summary of State Foreclosure Laws to see what kind of notice you'll get in your state), you’ll know when the lender takes this step because you’ll get a notice in the mail. If you get help from a HUD-approved housing counselor and try to work something out with your lender (even though you privately think you’ll be giving up your house), you might gain an extra month or two before the lender gives up on you and starts foreclosure proceedings. (See our article about HUD-approved housing counselors.)
So, from the time you decide to stop making payments until the time you receive notice that foreclosure proceedings have begun, you can live in your home for at least three months (maybe five or six) payment free.