Preforeclosure: How it works and what you can do

Missing mortgage payments is likely the furthest thing from your mind when you buy a home, but hardships like lost employment or an unexpected medical bill are the type of thing that can put you behind the eight ball. You may soon be receiving a preforeclosure notice.

Preforeclosure is the initial step toward foreclosure, having your home taken back by a lender. This doesn’t mean you need to prepare to move out. We’ll go over how preforeclosure works and the options that may be available to you if you find yourself confronting it. Finally, we’ll look from the perspective of a home buyer seeking a deal.

What does preforeclosure mean?

Preforeclosure generally refers to the timeframe between when your mortgage servicer,  the company to whom you make your payment, provides a notice of intent to foreclose and them exercising the right to repossess your home as collateral for your mortgage. 

If you don’t make your mortgage payment by the due date, you’re considered in default. There generally is a grace period in mortgage documents before a late charge is assessed. However, if your payment is 30 days late it will be reported as such to the credit bureaus.

You won’t receive a notice of intent to foreclose until 45 – 60 days after you first get behind on your mortgage for nonpayment, depending on the investor in your mortgage.

Your mortgage servicer will likely be trying to contact you well before it gets to this point, so discussing your situation with them early and working out an arrangement could help you avoid this unnecessary stressor.

Preforeclosure vs. foreclosure

You can think of the notice of intent to foreclose as an official warning that you need to take care of the issue before things progress to foreclosure. The actual foreclosure process itself, involving enforcing a mortgage lender’s right to take your home back under a lien, which is a legal claim on the property, is a legal process.

As part of the notice of intent you receive, the way to take care of the issue leading to the potential foreclosure proceeding will be outlined. Oftentimes, this is paying back missed payments, but there are other ways to violate your mortgage contract. The deadline will also be listed.

Going into a preforeclosure process doesn’t necessarily mean your home is going to be foreclosed upon. You still have time to act to avoid foreclosure, but you need to handle the problem urgently and contact your mortgage servicer.

How long is a home in preforeclosure?

Assuming the issue is related to nonpayment, generally, the actual process of referral to foreclosure doesn’t begin until 121 days after you first become delinquent if you’re occupying the home. Depending on your mortgage investor, that’s over a month after the notice of intent.

In some circumstances, things can move faster. If the home is vacant, the foreclosure process can start after 60 days. If you violate the due-on-sale clause, which is also referred to as the alienation clause, by selling your home without paying back your mortgage, your lender can demand repayment immediately.

When it comes to the actual foreclosure process, the timeline depends on the nature of the violation and state law. Some states have judicial foreclosures that go through the legal system and take longer. You can check your loan documentation as well as state law and talk to an attorney for specifics on your situation.

According to real estate data firm ATTOM Data Solutions, the average time to legal foreclosure completion in Q2 2025 was 645 days. Regardless of how long the process takes, it’s best to work with your loan servicer early on to identify options for loss mitigation, or ways you and your lender can work together to avoid foreclosure. The longer you wait, the harder it often is to get back on track.

How to get out of preforeclosure

There are many avenues for mortgage help that your mortgage servicer may qualify you for. It’s important to contact them at the first sign of trouble so you can give yourself the best chance to get current again. Rocket Mortgage^® clients can sign in to their Rocket Account, and go to Help > Payment assistance in the Mortgage tab.

It’s important to note that while we’ll go over various forms of mortgage relief, most of these typically have a negative impact on your credit. The exception tends to be assistance given in the wake of a natural disaster. However, the hit you would take from one of these options is often less than the credit impact of foreclosure.

Please note that it’s up to your servicer to qualify you for these options based on the hardship you’re facing and your long-term ability to repay.

Lump-sum payment

The most straightforward way to become current on your loan again is to just pay back all your past-due payments, along with any fees you may owe. Known as mortgage reinstatement, this may be easier said than done for many. But it can be a good option in certain situations, like an employer coming through with back pay.

Before moving forward with a reinstatement, be sure to get a quote from your servicer so that you know the amount that satisfies your existing obligations.

Repayment plans

If paying it back all at once isn’t going to work for you, the next avenue your servicer will look at is likely to be repayment plans. In a repayment plan, a portion of your past-due balance is added to your mortgage payment each month until the overdue amount is paid off. These are typically short-term, often lasting 3 to 6 months.

These can be realistic if you’ve had a temporary issue and can now afford larger payments based on your budget.

Forbearance

They sound similar, but there’s a big difference between forbearance and foreclosure. While foreclosure eventually takes away your home, forbearance is intended to keep you in it.

Forbearance is a temporary pause or reduction in your mortgage payment that is recommended as a last resort option for an expected short-term hardship. That’s because during forbearance you are falling further behind on your mortgage with the expectation to pay all past due payments in one lump sum.  Like repayment plans, these are often short-term in nature. 

Loan modification

Loan modification involves changing the terms of your existing loan to add your past-due payments back into the balance and bring the loan current. In this process, your interest rate could likely change. Your term may also be extended.

This is different from how a refinance works, which involves an entirely new loan. This is also only for hardships. Looking into a refinance itself may be a good avenue if you’re trying to improve your financial situation, but you should do this before you get into payment trouble. It’s much harder to qualify once you start missing payments.

Payment deferral or partial claim

A payment deferral takes your past-due payments and moves them to the backend of your loan to be made when the home is sold, refinanced, or otherwise paid off. This allows you to resume your current payments. A partial claim has the same effect, but your past-due payments become a secondary lien on the home.

Sell your home

If you and your servicer have gone over all your options for staying in your home and can’t make it work, another solution is to sell your home to pay off the mortgage balance if you can. This allows you to take any leftover proceeds and put them toward your next place. Going this route also results in no negative credit impact.

Short sale

A short sale is when you make an agreement with your mortgage lender to sell your property for less than what you owe due to a downturn in market values. Like the other alternatives discussed for mortgage relief, this must be approved by your servicer. They also have ultimate control over the sale process.

Your lender may be able to pursue you for the difference between what you owe, and the amount earned in the short sale, if they obtain a deficiency judgment. Be clear on whether they’re willing to issue a deficiency waiver. Additionally, your servicer may be able to give you cash consideration for maintaining the condition of the property.

In comparing a short sale to a foreclosure, a short sale is preferable for homeowners because under certain circumstances, there may be no waiting period before getting into your next home. You can get an FHA loan immediately under the following circumstances:

• There are no payments showing on your credit as 30 or more days late in the year prior to the short sale date.
• You also have no 30-day late payments in the 12 months before your application for your new loan.

Deed in lieu of foreclosure

A deed-in-lieu of foreclosure is voluntarily giving your property back to your mortgage servicer or lender. Again, they must agree to this. Be sure to talk to them about their policies. The same ability to pursue deficiencies exists here as for short sales. But so does the incentive for keeping up the home.

On the downside, waiting periods for new loans after a deed-in-lieu of foreclosure can be like a foreclosure. VA loans have the 2-year waiting period, while it’s 3 years for FHA. Conventional conforming loans have a 4-year waiting period, 3 years less than foreclosure.

Housing counseling

Your first point of contact for mortgage relief should always be your servicer, but it’s understandable to want a second opinion in a stressful situation. The Department of Housing and Urban Development (HUD) has a directory of housing counseling agencies available. These are typically free.

You should be wary of anyone who promises a quick fix or tries to charge you a high upfront fee. If something sounds too good to be true, it probably is.

If you do housing counseling, you should be prepared to fully talk through your situation. Bring financial statements so that the housing counselor can talk through your budget holistically. Mortgage statements will also be helpful. You can bring in notes on anything you’ve discussed with your servicer.

Who buys preforeclosure homes?

What if you’re on the other side of the process, trying to buy a home that’s either about to be foreclosed or has been foreclosed and will soon be sold. There are some benefits and drawbacks to buying a foreclosed home.

The primary benefit is that you could get a deal, but you do need to understand its condition and the local laws about potential redemption. Let’s look at what this means for both investors and first-time home buyers.

Real estate investors

As a real estate investor, you’re looking for homes often at good value that you can renovate and flip for an easy profit at times. Buying a foreclosed home can be a good target for this from the present standpoint. However, you may be buying more of a fixer-upper home because the previous owner often doesn’t have the money for routine maintenance.

Beyond being ready for a project, doing all your normal math for ROI, like what cap rate you would have to achieve, is important.

First-time home buyers

First-time home buyers may find the potential low price of a foreclosed home tempting, but before you rush to put in an offer, remember the property could need a lot of work.

It’s also important to know that even after the foreclosure sale, some states have a period of redemption, which is the specific time period when a homeowner can exercise their right of redemption. This means that after a certain period after the sale, the previous homeowner can buy their property back by paying the balance owed on the mortgage, with interest and fees. It can take a while with these sales before you can safely move in.

FAQ

We’ve touched on the basics, but before we wrap, let’s answer some more questions you may have.

How many missed payments trigger preforeclosure?

Depending on the investor in your mortgage, the preforeclosure notice process starts once you’ve been somewhere between 45 – 60 days delinquent in your payments. That’s between two and three payments.

If you are going through a hardship, contact your mortgage servicer to discuss what options may be available to you.

How do I know if my home is in preforeclosure?

If your mortgage delinquency has gone on for a period of at least 45 – 60 days, you should receive a notice of intent to foreclose that signifies the beginning of the preforeclosure process.

How can I avoid foreclosure?

The most important thing you can do is communicate with your servicer at the first sign of trouble. They’ll be able to work with you to look at options to stay in your home, like repayment plans and loan modifications. If that’s not feasible, they can help you plan for a graceful exit.

Do I still owe money if my house is foreclosed upon?

In some states, lenders still have the right to pursue a deficiency judgment for the difference between what a lender could get in the sale of any property surrendered and the amount that you owe on the balance. Lenders may waive this judgment, but they’re not obligated, so be sure to get it in writing if they do.

Is buying a preforeclosure home a good idea?

Buying a preforeclosure home enables you to sometimes get a better deal based on the market investor trying to get the home off their books. But these are often fixer-uppers, and the process can take longer. You may also have to do some searching for those deals. HUD homes are probably the best known, but all investors list inventory.

The bottom line: You have options if you’re in the preforeclosure process

Preforeclosure is the time between notice of intent to foreclose on a home and the foreclosure process itself. The best thing to do is reach out to your servicer as soon as possible when you’re going to have trouble making your mortgage payment. They’ll be able to qualify you for options to stay in your home or exit.

If you are a Rocket Mortgage^® client experiencing payment trouble, we’re here to help. Sign into your Rocket Account and find Help > Payment assistance under the Mortgage tab.