What is Foreclosure and how does it Work? Foreclosure is the legal procedure a lending institution utilizes to take ownership of your house if you default on a mortgage loan. It's expensive to go through the foreclosure process and causes long-lasting damage to your credit rating and monetary profile. Today it's relatively rare for homes to enter into foreclosure. However, it's crucial to comprehend the foreclosure process so that, if the worst happens, you understand how to survive it - and that you can still go on to prosper. Foreclosure definition: What is it? When you secure a mortgage, you're concurring to utilize your home as security for the loan. If you stop working to make prompt payments, your loan provider can reclaim the home and offer it to recover some of its cash. Foreclosure rules set out exactly how a financial institution can do this, but also offer some rights and securities for the property owner. At the end of the foreclosure procedure, your home is repossessed and you must vacate. Just how much are foreclosure costs? The average house owner stands to pay around $12,500 in foreclosure costs and costs, according to information from the Consumer Financial Protection Bureau (CFPB). The foreclosure process and timeline It takes around 2 years typically to complete the foreclosure process, according to data covering foreclosure filings throughout the third quarter of 2024 from ATTOM. However, non-judicial foreclosures can take just a couple of months. Understanding the foreclosure procedure Typically, your lending institution can't initiate foreclosure unless you're at least 120 days behind on your mortgage payments - this is referred to as the pre-foreclosure duration.