30 days: Your troubles actually start as soon as you miss a single payment. Lenders may not contact you until you've skipped a second payment, but most will report the first late payment and every subsequent delinquency to the credit bureaus. Even a single late payment can devastate your credit score, the three-digit number that lenders use to help gauge your creditworthiness. Each subsequent "late" further decreases your score, making it more difficult and expensive to get a loan or a refinance that might help your situation. In addition, lenders typically tack on late fees of 5% or so for each missed payment.
90 days to one year: Eventually, if the payments aren't made, the lender will file a d"notice of default" with a local courthouse and send you a letter saying that the foreclosure process will start unless you make good the missing payments.
How quickly the notice is filed depends on the individual lender. Some hold off if you contact them to work out a payment plan or otherwise explain your situation. Others are more aggressive and start the process as soon as possible to try to protect their investment.
"They may do it as early as 90 days, or as late as a year," explained Anthony Hsieh, president of LendingTree.com. "It really depends on the lender's temperament."
Usually, this notice means that the amount you owe has shot up as well, since the lender typically adds substantial fees to cover its legal costs.
The notice of default "is a big threshold," Hsieh said. "Once you get into that state, it's a whole different world. Your options are fewer."
The notice of default is generally picked up by the credit bureaus, further depressing your credit score and making refinancing the loan extremely difficult.
(In addition, the notice tips off scam artists that you're in trouble and may be vulnerable to various "equity skimming" schemes. One common ploy: The scam artist promises to take over your payments, but instead rents out your house and keeps the rent payments as pure profit. The home goes into foreclosure, your credit is trashed and you've lost any equity you had in the home.)
90 days more: Borrowers typically have 90 days from the notice of default to make up the deficit before the lender sends out a "notice of sale," which sets a sale date for the house (typically within the next 15 to 30 days).
Some lenders will allow you to keep your original loan if you can make up the missing payments plus any late fees and legal charges. Others will insist you refinance with another lender. You can also halt the foreclosure, at least temporarily, by filing a lawsuit or filing for bankruptcy. For either legal option to work, you'll have to be able to come up with a payment plan to fix the deficit.
By Liz Pulliam Weston