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FACING FORECLOSURE? YOU’RE NOT ALONE - AND YOU DO HAVE OPTIONS.
When you’re behind on your mortgage, the fear, pressure, and uncertainty can feel overwhelming. The hardest part is not knowing what choices you really have or which path will protect your family, your credit, and your future.
Every situation is different. Your goals, your timeline, and your finances matter — and the right option should fit your life, not force you into something that makes things worse.
Below is a clear, simple breakdown of the 13 most common paths homeowners take. This will help you understand the impact of each option so you can make the choice that gives you the best chance to regain stability and move forward.
OPTION #1: REINSTATEMENT
You pay the full past-due balance and bring the loan current. This stops the foreclosure immediately, but you must still afford the monthly payments going forward. Funds can come from savings, family, a loan, or selling personal items.
OPTION #2: REPAYMENT PLAN
The lender spreads the past-due balance over the next 6–12 months. This brings the loan current and stops foreclosure, but it increases your monthly payment until the past-due balance is fully paid.
OPTION #3: LOAN MODIFICATION
The lender moves the past-due balance to the back of the loan and adjusts the terms to create an affordable monthly payment. They may change the interest rate, extend the loan term, or restructure how payments are applied.
OPTION #4: PARTIAL CLAIM (FHA Only)
Your mortgage stays exactly the same, and the past-due amount is moved into a second, 0%-interest loan. That balance doesn’t have to be repaid until you sell the property, refinance, or pay off the mortgage in full.
OPTION #5: DEFERRAL (Conventional / VA / USDA)
Your payment stays the same, and the past-due balance is moved to the end of the loan. Unlike a Partial Claim, it does not become a second loan.
OPTION #6: FORBEARANCE
The lender temporarily suspends or reduces payments for a set period. When the forbearance ends, you must either reinstate the loan, start a repayment plan, pursue a loan modification, receive a Partial Claim (FHA), or request a deferral (Conventional/VA/USDA).
OPTION #7: REFINANCE
If your income and credit qualify, the lender replaces your existing loan with a new one that includes the past-due balance. This results in one clean mortgage, though the payment is often higher if current market rates exceed your original rate.
OPTION #8: DEED IN LIEU OF FORECLOSURE
You voluntarily surrender the property to the lender instead of going through a full foreclosure. It still affects your credit, but far less than a foreclosure, and it stops additional legal and attorney fees from building up. Mortgage eligibility is typically delayed 2–4 years, and some landlords may treat it the same as a foreclosure when screening applicants.
OPTION #9: FORECLOSURE
The lender takes the home to auction. This stays on your credit for 7 years, drastically affects your ability to get new loans or even rent, and may result in a deficiency judgment if the sale doesn’t cover what you owe. Foreclosure causes a 120–160+ point credit drop and is the most damaging option with the longest recovery time.
OPTION #10: CHAPTER 7 BANKRUPTCY
Chapter 7 immediately stops foreclosure, collections, and legal actions, but only for a short period—typically 30–90 days. It does not offer a repayment plan for your mortgage. Once the stay ends, foreclosure can resume unless you catch up, modify the loan, or sell the home. A Chapter 7 stays on your credit for 10 years and often results in a 130–200+ point drop.
OPTION #11: CHAPTER 13 BANKRUPTCY
Chapter 7 immediately stops foreclosure, collections, and legal actions, but only for a short period—typically 30–90 days. It does not offer a repayment plan for your mortgage. Once the stay ends, foreclosure can resume unless you catch up, modify the loan, or sell the home. A Chapter 7 stays on your credit for 10 years and often results in a 130–200+ point drop.
OPTION #12: SHORT SALE
You sell the home for less than what you owe with a licensed real estate agent if the lender agrees to accept the reduced payoff. This avoids a foreclosure on your record, but the process can take time and still impacts your credit. The lender may forgive the remaining balance or pursue a judgment. Mortgage eligibility typically takes 2–3 years, and credit drops about 60–120 points.
OPTION #13: SELL BEFORE THE AUCTION
You can sell the home before the auction to avoid foreclosure. There are three main ways to do this:
Traditional listing: Best if you have equity, since you must cover the mortgage balance, past-due balance, agent commissions, closing costs, and any repairs or buyer credits. This typically takes 90+ days.
Investor cash sale: An investor pays off the mortgage balance, past-due balance, and all closing costs. This usually requires some equity to make the deal financially workable for the investor. This can be quick, but the amount may not always support the mortgage balance.
Investor creative finance sale: An investor brings the loan current by paying the past-due balance and starts making your monthly mortgage payments. The deed transfers to the investor and the loan stays in your name until a new buyer with bank financing purchases the property from the investor. This stops foreclosure immediately, removes your monthly payment burden, helps rebuild your credit through consistent on-time payments, and allows you to qualify for a new mortgage in 6–12 months. When the home eventually sells or refinances, your loan is paid off in full.