Pre-foreclosure:
Pre-foreclosure status begins when the lender files a notice of default on the monthly mortgage payments, informing the homeowner that legal action for foreclosure will be taken if the delinquent mortgage payments are not paid.
If the homeowner defaults on the accumulated delinquent payments and does not sell the home during the pre-foreclosure period, the lender will eventually sell the property at auction. However, the homeowner may also choose to sell the home before entering the foreclosure phase.
If you have just received a pre-foreclosure notice, you can still avoid foreclosure if you are able to make the outstanding payment. Among other steps to consider to avoid foreclosure are the following:
1. Negotiate with your lender: Show the lender your interest in keeping the house that you are interested in doing whatever it takes to save your home and make things right again. Remember this: your lender does not want to foreclose on your property. They would prefer to work out an agreement that is mutually beneficial.
2. Forbearance: This allows you to make no or reduced payments for an agreed upon period of time. This gives you enough time to regain your balance. Thereafter, you will continue with regular payments while you make up the missed payments at the end of the loan.
3. Loan modification: This is when your lender modifies the terms and conditions of your loan so that you can afford to make future payments. For example, the lender may agree to a longer term as a means of reducing your payment. Or they may allow you to add late payments to the balance, so you can get a fresh start.
4. Short Sale: The lender agrees to let you sell your home for less than you owe. This allows you to get out from under the property, all without the damage of foreclosure.
The length of pre-foreclosure varies from state to state. Typically, in most states, homeowners have between 90 and 120 days from the first notice of default on their mortgage payment to reach an agreement before the home is sold at auction.
Note: Keep in mind that "when a foreclosure occurs on a home, it is reflected on the foreclosed homeowner's financial history for 7 years, and for that entire time they will not be considered eligible for new credit."
Tip: sell the property before a foreclosure and get the most money to be able to buy a new property and above all take care of your credit history.