Realizing that you can no longer afford your home affects your well-being in more ways than one. Apart from the financial stress, the prospect of losing your house can set you on an emotional roller coaster.
As difficult as this time is, it’s important to remember that you’re not alone and there are options available to you. The key is to act quickly.
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What happens if you can't pay your mortgage?
If you miss multiple consecutive mortgage payments, your lender may initiate the foreclosure process. Even just one or two missed payments can bring financial consequences.
A single missed payment will trigger a late fee, which can be up to 4–5% of the total overdue balance[2]. These late fees accrue each month that goes unpaid. The more late fees you incur, the more difficult it becomes to catch up.
Your credit score[3]will also see an immediate impact. For instance, a consumer with a credit score of about 720 will see it drop to 630–650 after 30 days and 610–630 after 90 days. Those are just late payments — an actual foreclosure could lower your score by at least 100 points. It can take 7–10 years[4] for your credit score to recover. Generally, higher starting scores take longer to improve.
The good news is that foreclosure happens in stages and can last for months or even years in some states, so you won’t lose your house immediately. And, even once foreclosure proceedings have begun, there are ways to stop them. But you need to start working with your lender right away to explore your options and develop a plan to avoid foreclosure.
⏰ The foreclosure process
Here's a look at the foreclosure process in more detail.
- Payment default (1 missed payment): Most lenders offer a 10- to 15-day grace period during which you can submit a late payment without penalty. If you fail to pay, you’ll trigger the default phase, incur a late fee, and ding your credit score.
- Notice of default (3 missed payments): Your lender will file a formal notice of your delinquency, putting you into pre-foreclosure. You generally have 30 days to make arrangements with your lender before they proceed with foreclosure.
- Notice of trustee’s sale (~120 days): Foreclosure can’t legally begin until you’re about 120 days delinquent. At this point, you’ll receive official notice that your home has been scheduled for auction.
- Auction/trustees’ sale (5–6 months): In a judicial foreclosure, a judge will order the foreclosure sale. This process happens in court and can take up to a year. A nonjudicial foreclosure occurs outside the courtroom and tends to move more quickly.
- REO & eviction (6+ months): If your home sells, you’ll receive a notice to vacate the property (if you haven’t already). Unsold homes become bank-owned, and you’ll receive an eviction notice, as required by state law.
- Redemption period: After the sale, some states offer a redemption period, during which you can reimburse the highest bidder or pay off the entire mortgage to reclaim your home.
Foreclosure procedures vary by state and often depend on whether a judicial or nonjudicial foreclosure is required. Some states allow both.
The timeline also varies. In the last quarter of 2024, foreclosure proceedings took an average of 762 days to complete[5].
If you’re facing foreclosure, it’s critical to seek local legal advice and understand your state’s policies. Visit your state’s housing agency website or contact a local nonprofit specializing in housing assistance. NoLo[6] has a brief rundown of each state’s foreclosure laws, while foreclosurelaw.org[7]has more detailed state-by-state information. You can also contact a housing counselor through the U.S. Department of Housing and Urban Development (HUD)[8].
⚠️ Take action to avoid foreclosure
🏦 Reach out to your lender
The sooner you contact your lender for mortgage assistance, the better — especially if you want to keep your home. Your lender will likely refer you to its loss mitigation department to discuss options such as refinancing or loan modification.
“The best-case scenario is that the homeowner is proactive and contacts the loan servicers, alerting them of the situation and the desire to catch up on the loan,” said DJ Olojo, a real estate agent and investor. “The servicer may make arrangements with the homeowner so they can avoid unnecessary legal fees and stress.”
If you’d like to sell your house to avoid foreclosure, your lender can tell you what you owe. This should include your missed mortgage payments, late fees, and attorney’s fees. Then, use a home value estimate website to determine how much your property is worth (minus the cost of selling) to ensure the final sale price will cover your debt.
☎️ Talk to a HUD-approved housing counselor
HUD-certified housing counselors work in every community and can be a vital resource as you navigate homeownership challenges. Not only will a counselor help you organize your finances, but they can also represent you in negotiations with your lender. Their services are free or very low-cost.
You can search for a HUD counselor[9] near you or call 800-569-4287. Be sure to bring:
- Pay stubs or W-2s stating your income
- A list of monthly expenses to evaluate your spending
- Loan statements, credit card balances, and other evidence of debt
- The terms of your mortgage
- Communication from your lender
❗ Avoid companies looking to profit from your situation
Unfortunately, some companies will try to take advantage of you and your situation. For instance, you’ll likely start hearing from for-profit companies promising to negotiate with your lender. Avoid them! You should never have to pay for help preventing foreclosure.
A HUD-certified counselor is your best option. Instead of paying a company for their “help,” you can save that money and put it toward your mortgage.
What options do I have if I can't afford my house anymore?
If you can’t afford your house anymore, foreclosure isn’t the only option. There are various paths you can take depending on whether you think you can get caught up or need to get out of your mortgage.
“If you expect to recover from your financial problems soon, you should contact your mortgage service early and let them know,” Morgado said. “They may offer you a forbearance or loan modification. In the worst case, it’s always better to try to sell the property.”
🙏 Apply for mortgage forbearance
If your lender grants a mortgage forbearance, they’ll reduce or suspend your monthly payments for up to one year. However, they’ll continue to report you as current on your loan, so this won’t affect your credit score. A forbearance doesn’t happen automatically when you stop paying your mortgage — you must work out a plan with your lender.
Mortgage forbearances are good for homeowners facing a temporary financial hardship, such as a job loss, unexpected medical bills, or home damage from a natural disaster. When the forbearance period ends, you must repay what you missed, plus interest, via a lump-sum payment or over a repayment plan. You can also defer repayment until your original loan is up or get a loan modification.
💵 Refinance your mortgage
Consider refinancing your mortgage if interest rates have fallen at least one percentage point since you got your loan. This option lowers your monthly payment permanently by reducing the interest rate or extending the repayment term. You could also switch from an adjustable-rate to a fixed-rate mortgage, so your rate won’t increase.
To get the best rate, you’ll need a good credit score[10] (at least 580–620, depending on the loan type). Higher scores will secure better rates and terms.
However, you’ll have to pay closing costs, which are typically 2–5% of the loan amount. So, this might not be the best option if you’re short on cash.
✍️ Request a loan modification
With a loan modification, your lender will adjust the terms of your loan to make payments more affordable. They might lower your interest rate, extend the repayment timeline, reduce the principal, or convert your adjustable-rate mortgage to a fixed-rate one.
To qualify, you must provide proof of significant financial hardship and be at least 1 month behind on your loan. You must also live in the home as a primary residence.
There are a few downsides to a loan modification. For instance, unless your lender reports your mortgage “paid as agreed,” it could hurt your credit score[11]. Although once the permanent modification is in place, your score should improve. You’ll also pay more interest over time by extending the repayment timeline.
🏡 Sell your home
A traditional home sale could be a good option if you start early. It can take about three months to sell a house, but an experienced real estate agent can help you price and market the home to sell fast. You’ll be more likely to get at or above market value, which should be enough to pay off the overdue mortgage plus late fees, realtor fees, and other expenses.
A low-commission real estate company can connect you with agents who charge less, so you can keep more of the profits — 1–1.5% versus the average real estate commission rate of 2.74%. If your home needs work, a realtor can advise you on whether you should fix up your house or sell it as-is.
Selling to a cash buyer (such as an iBuyer or other company that buy houses for cash) is ideal for a quick transaction, especially if you’re selling a home that needs work. However, the amount an investor will pay for your house varies and is often 60–80% of its after-repair value.
You could also lose money selling as-is, so ensure the sale proceeds will cover what you owe. It’s best to get several quotes, but time is short. A free service like Clever Offers gathers multiple offers from pre-vetted iBuyers and investors so you can sell in as little as a week.
🔑 Rent out your home
If you have another place to live, you can rent out your home and use the income to pay the mortgage. However, you need to make sure the income will cover the mortgage repayment. You can also rent out a room or area of the property to supplement your income if you need to remain in your home.
Talk with your lender to ensure your loan terms allow you to rent out your home. Most lenders require homeowners to wait a year before converting their residence into a rental property. There could also be tax implications[12].
🏦 Request approval for a short sale
A short sale involves selling your home for less than you owe, so your lender must approve it. To qualify, you’ll have to show financial hardship and provide documentation like bank statements and bills. Once approved, we recommend finding a real estate agent certified in short sales.
Offers go to your lender, who negotiates on your behalf. Once they accept an offer, you may have to pay the difference between the sale price and the mortgage’s remaining balance.
This can be a good option if you don’t owe a lot. You’ll do less damage to your credit score, and most (or all) of the mortgage debt will be absorbed through the home purchase or forgiven by your lender. However, you’ll have to wait 2–7[13] years before getting a new mortgage.
📃 Explore a deed in lieu of foreclosure
A deed in lieu of foreclosure is when you voluntarily turn ownership of your home over to your lender. With this option, you avoid foreclosure and likely won’t be held responsible for the amount left on the mortgage. This can be a good move if you haven’t been able to sell your property.
“For a deed in lieu to work, you have to have a fully clean title,” said Ashley Morgan, attorney and owner of Ashley F. Morgan Law, PC, in Virginia. “This means there cannot be any tax liens or judgment liens against the property.”
This is less damaging to your credit score and releases you from the obligation to pay off the remaining loan balance. Your lender may let you lease the property as you look for a new place to live. One drawback is that it may be harder to obtain another mortgage in the future.
Bottom line
Not being able to pay your mortgage is stressful and emotional, but it doesn’t mean a foreclosure is set in stone. You have options, whether staying in your home or letting it go to get your expenses in order.
While the threat of foreclosure can feel overwhelming, the worst thing you can do is nothing. Contact your lender as soon as you miss a payment to discuss your options. Also, lean on a HUD-certified housing counselor, who can offer valuable support and negotiate on your behalf.
FAQs
How many mortgage payments can you miss before foreclosure?
You can typically miss three to six consecutive mortgage payments before foreclosure proceedings begin. But even one missed payment will ding your credit score and trigger communication from your lender.
Can you pay your mortgage with a credit card?
Yes, you can pay your mortgage with a credit card, but it’s a complicated process. Most lenders don’t allow you to pay with a credit card directly, so a workaround is needed — and these workarounds can cost money. For instance, Plastiq.com[1]lets you pay your mortgage with Discover and some Mastercards, although it charges a 2.9% fee.
When is it too late to stop foreclosure?
Generally, it’s too late to stop foreclosure once your home has been sold at auction. In a nonjudicial foreclosure, a foreclosure can often be stopped hours before the sale occurs. In a judicial foreclosure, you have until the court orders a sale.
If your state offers a redemption period, you can reclaim your home after the sale by reimbursing the highest bidder or paying off the entire mortgage.
How do I apply for mortgage assistance?
To apply for mortgage assistance, contact your lender. You’ll likely be connected to the loss mitigation department to explore your options. You can also contact a HUD-certified counselor for free help reviewing your situation, negotiating with your lender, and getting your finances in order.
Can I get a loan modification after missing payments?
Yes, you can get a loan modification even after missing payments. This will adjust the terms of your loan to make payments more affordable. You must provide proof of a significant financial hardship, be at least one month behind on your loan, and live in the home as your primary residence.
