How do preforeclosures work?
Preforeclosure is the first step in the foreclosure process. It’s the period after you’ve defaulted on your mortgage, but before the lender takes possession of your home. Usually, you won’t face preforeclosure until you've missed three monthly payments. At this point, the loan is in default, and the mortgage lender must follow a legal process to proceed with foreclosure.
The preforeclosure period is an opportunity for the homeowner to pay off the outstanding debt or potentially sell the property before it goes into foreclosure. If the situation is not resolved, this process can ultimately result in the lender repossessing the property.
Once the preforeclosure begins, the lender or servicer will send you a notice of default. This legal document alerts the borrower of their failure to fulfill the obligations outlined in the mortgage agreement. It may also state the actions the lender intends to take if payments aren’t made current.
The notice of default is also filed with the local recorder’s office in case the lender has to file a lawsuit later. The lender may move forward with foreclosure around 30 or 45 days after sending this notice.
Triggers and early warning signs of preforeclosure
Preforeclosure doesn’t happen out of the blue. Consider contacting your lender or servicer and exploring your options as soon as possible if:
- Your financial situation declines. If you lose your job, have major medical bills to pay or otherwise find yourself facing financial hardship, you may be eligible for loan modification or another plan that can help you stay in your home. (We explore these options later in this article.)
- You have trouble making payments. Even if your income hasn’t changed, other factors can cause you to be financially strapped. If you struggle to make your monthly mortgage payments along with your other bills and expenses, trouble could be on the horizon. Preforeclosure generally can begin after you’ve missed three payments, so if you miss a payment or two, reversing course can be difficult.
- Your home has negative equity. If your home’s value is less than the amount you owe on it, a job loss or other major financial event may trigger preforeclosure. While negative equity alone doesn’t mean your home is destined for preforeclosure, you’d likely have a difficult time selling it for the amount that would help you get out of debt.
How long does preforeclosure last?
The length of time you have between preforeclosure and foreclosure varies by state, but foreclosure usually can’t start until you’re at least 120 days behind on your mortgage payments, according to the Consumer Financial Protection Bureau (CFPB). The specific rules and timelines for preforeclosure can also vary based on the terms of the mortgage agreement.
Some lenders move quickly through the foreclosure process. This may depend on whether foreclosure is judicial, meaning a court hearing and order are required, or nonjudicial, meaning court action isn’t required.
How preforeclosure affects your credit
While preforeclosure is not a specific entry on your credit report like foreclosure is, your missed payments are reported to the credit bureaus, which can bring down your score significantly. Your payment history makes up 35% of your FICO credit score.
In comparison, foreclosure has more severe penalties to your credit and will stay on your credit report for seven years. This entry can be a red flag to any potential lenders if you want to buy a house again or to landlords if you plan to rent.
» MORE: How to build credit
How to avoid foreclosure
If you think you’ll miss a mortgage payment or have already skipped one, it’s important to contact your lender as soon as possible to discuss your options. One option your lender may present is mortgage forbearance, which is a temporary pause or reduction in payments.
“A lot of lenders and banks will work with you if you are falling behind in your mortgage payments,” said Maureen McDermut, a real estate agent in Santa Barbara, California. “Upfront communication will help you understand what your options are, and the truth is mortgage companies do not want you to default or go into foreclosure, so they will often allow you to set up alternative arrangements.”
A lot of lenders and banks will work with you if you are falling behind in your mortgage payments. ”
Fortunately, preforeclosure doesn’t mean foreclosure is inevitable. You can take some steps to halt the foreclosure process.
1. Contact HUD for counseling
McDermut recommended contacting the U.S. Department of Housing and Urban Development (HUD), which offers a list of housing counseling agencies that can assist you. Your counselor will help you determine the next best steps and help you apply for a loan modification or refinance program if you are eligible.
Foreclosure avoidance counselors are free in every state, so be wary of anyone asking for a fee or claiming to be a foreclosure counselor who is not HUD-approved.
2. Refinance your mortgage
One way to prevent foreclosure is to refinance your mortgage, which essentially restarts your mortgage.
Depending on your current credit score, refinancing can help you secure a lower interest rate or extend your loan term, which can lower your monthly payment. If your home’s value has increased since you purchased it, refinancing could lower your monthly payments and help you eliminate private mortgage insurance (PMI).
» MORE: How to lower your monthly mortgage payment
3. Ask about loan modification
Some lenders might let you modify your mortgage terms, making your payments more affordable. Loan modification is different from refinancing and could involve extending the loan term, reducing the interest rate or even deferring some of the principal.
Loan modification options can vary by lender. And as Robert, a reviewer in Connecticut found out, it’s important to not take lenders solely on their word.
“[My lender] told me they would modify the loan and put the deferred payment [...] at the end of the loan,” he said. “Now [they tell] me they wouldn't do that and are demanding the entire $19,000 payment at once and will be foreclosing on me[.]”
» MORE: Loan modification vs. refinance: how to decide
4. Opt for a short sale
A short sale is when a lender allows a struggling borrower to sell their home for less than what they owe on their mortgage. The lender could require you to pay the difference or grant you a waiver of deficiency, forgoing its rights to collect the remaining balance. You might decide to go with a short sale even before preforeclosure if you’re worried you won’t be able to make future mortgage payments.
You can use the proceeds from the sale to pay off the mortgage debt and potentially avoid the negative consequences of foreclosure. It’s important that you act quickly and work with a real estate professional who has experience in preforeclosure situations, as there may be time constraints and specific requirements to navigate.
But selling your home could take some time, even at a deeply discounted price. A short sale may not be an option for everyone, depending on how far along you are in the process, so it’s critical that you contact your lender earlier rather than later to discuss your alternatives. Your lender will have to approve any short sale.
5. Deed in lieu of foreclosure
A deed in lieu of foreclosure involves you voluntarily turning over ownership of the house to the lender as a way to avoid foreclosure. If you’re considering this option, ask your lender or servicer what this would entail and what your responsibilities would be.
Your lender or servicer may be able to connect you with relocation expense assistance, and it may waive any deficiency (the difference between the property value and what you still owe) for which you would otherwise be responsible.
You may still have tax liability on the property though, so speak with a tax attorney if you choose this route.
FAQ
How do you know if your home is in preforeclosure?
Preforeclosure typically begins when you miss three mortgage payments and receive a notice of default. During preforeclosure, you still own the home and can live in it for the time being.
What happens if you can't bring your mortgage payments up to date during preforeclosure?
If you’re unable to catch up on your payments, your lender may pursue foreclosure. Seek out every source of help possible before foreclosure, even if it means selling the home through a short sale. It’s a good idea to seek legal advice or consult with a foreclosure specialist who can guide you through the process and possible alternatives.
Does a short sale hurt your credit?
Yes, a short sale can hurt your credit. A short sale is considered a derogatory item on your credit report and may stay there for up to seven years. While a short sale will affect your credit, it won’t necessarily affect it as much as a foreclosure if there’s no reported deficiency balance.
How can you buy a preforeclosure property?
It can be harder to find preforeclosure properties to buy since they’re not listed on the market yet. You can typically search your county recorder’s online records for properties with a notice of default or a notice of sale. Local real estate agents may also have leads on properties that may be coming to the market, so it could be worth reaching out to any contacts you have.
Bottom line
Lenders must follow a specific legal process to foreclose on a property. The first step is sending a notice of default, which signals preforeclosure and lets the borrowers know the foreclosure process has begun.
The most important action to take if you’re in default is to contact your lender or servicer as soon as possible, preferably before you miss any more payments. The sooner you make the lender or servicer aware of the problem, the more likely it’s able to offer a solution that will help you stay in your home.
You can also seek out foreclosure avoidance resources from your state’s housing agency.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- ATTOM, " U.S. Foreclosure Activity Increases in 2025." Accessed Feb. 2, 2026.
- U.S. Department of Housing and Urban Development, "Housing Counseling Services." Accessed Feb. 2, 2026.
- Consumer Financial Protection Bureau, "How long will it take before I’ll face foreclosure if I can’t make my mortgage payments? What is the foreclosure timeline?" Accessed Feb. 2, 2026.
- Consumer Financial Protection Bureau, "What is a deed-in-lieu of foreclosure?" Accessed Feb. 2, 2026.
- Tang & Associates Law Office, LLC, "Spotting the Signs of Impending Foreclosure." Accessed Feb. 2, 2026.
