Pre-Foreclosure vs. Foreclosure: The Difference

If you’re struggling to make your mortgage payments, the idea of pre-foreclosure and foreclosure can both seem inevitable and intimidating. However, understanding the differences between pre-foreclosure vs. foreclosure is vital as each process has different limitations and options for getting out of it. 

Let’s take a closer look.

What Is Pre-Foreclosure?

If you miss a mortgage payment, pre-foreclosure typically takes place before foreclosure officially begins. During the pre-foreclosure process, your lender sends you repeated written warnings telling you to pay what you owe, or they may be forced to begin foreclosure.

While in pre-foreclosure, you’ll still own your property — but unless you can halt the pre-foreclosure proceedings, your lender may petition the court for eviction and foreclosure documents.

Usually, pre-foreclosure is started when your bank or lender sends you a notice of default. The notice of default is accompanied by a notice in the county recorder's office. Some lenders may even file a lawsuit in court during this time. 

Pre-foreclosure also includes any loss mitigation strategies you and your lender may attempt. For example, should you enter into a repayment plan with your lender and fail to make repeated payments on time, you’ll still be in pre-foreclosure. 

It’s essential to remember that the pre-foreclosure clock doesn’t restart each time you try a new method to avoid foreclosure. The countdown to foreclosure will continue until you become current on your mortgage loan or find alternative ways to settle with your lender. 

What Is Foreclosure?

Foreclosure is the legal process that involves the bank or lender repossessing your property. If you enter foreclosure, it’s almost impossible to regain property ownership, even if you try to make a mortgage payment to your lender.

The combination of pre-foreclosure and foreclosure can take several months from start to finish. During pre-foreclosure, lenders usually start posting right away when a payment is late — it will state on the report 30 days, 90 days, and so on, depending on the case. An official foreclosure, however, will report. 

If the foreclosure is completed on the property, it will stay on your credit report for seven years and will be very difficult (if not outright impossible) to obtain a conventional mortgage loan during this time. 

Is Pre-Foreclosure Always Before Foreclosure?

Yes. Most states have laws stating that lenders and banks must abide by specific regulations and complete certain steps before they can repossess real estate. They’re legally required to send you notifications and warnings that your payments are delinquent and pre-foreclosure has begun. 

However, it’s essential to remember that not every state has a distinct pre-foreclosure process. Technically, every lender must go through pre-foreclosure before repossessing your property. But the way that process unfolds can vary dramatically from state to state.

What Are the Big Differences Between Pre-Foreclosure and Foreclosure?

Knowing the differences between pre-foreclosure and foreclosure is essential, as it will impact your next steps. Here are some of the most significant differences: 

Redemption Flexibility

One of the most important differences between the pre-foreclosure and foreclosure steps is redemption flexibility. There are more options to recover your mortgage when you’re in pre-foreclosure versus foreclosure. 

When you’re in pre-foreclosure, you can:

  • Repay whatever money you owe on your mortgage.
  • Try to renegotiate your loan’s terms through a loan modification or refinance.
  • Offer your deed in lieu of foreclosure.

On the other hand, if your home is already in foreclosure, your lender is in the midst of evicting you and will likely attempt to repossess your property shortly. Generally, you do not need to move out of your home until the foreclosure process is complete and the house is auctioned off. 

If you’re in foreclosure, your lender may not accept further attempts to redeem the balance owed. They will sell your property (usually through an auction or short sale) and you will need to arrange to make living arrangements elsewhere. Since foreclosure is difficult to remedy, you must do everything possible to fix the situation while still in pre-foreclosure. 

Your Living Situation

The good news is that you can stay on your property and retain ownership of your house when you’re in pre-foreclosure, and you can live in your home during foreclosure until the home is auctioned off. 

Once you’re in foreclosure, you might be forced to leave via eviction by the local sheriff’s department. First, you would receive an eviction notice that gives you a certain amount of time to pack up and leave. If you’re not gone by the stated date, you may be forced to leave by the police or be arrested for trespassing. 

It’s important to remember that being in pre-foreclosure doesn’t mean you’re safe. Foreclosure proceedings can happen much faster than you think, and many homeowners believe they have more time than they do. If you’ve missed several mortgage payments, you should immediately take steps to get caught up before it’s too late. 

Impact on Credit Report

Pre-foreclosure doesn't significantly impact your credit report. For example, if you miss a mortgage payment and enter pre-foreclosure but pay the overdue balance immediately, very little will happen to your credit.

On the other hand, if your home is foreclosed on, it will be recorded on your credit report for seven years. It will be very challenging to qualify for a new mortgage loan during that time, even if your credit score is excellent and you have a lot of money saved to make a significant down payment.

A foreclosure can also make it challenging to qualify for any other type of loan, like a personal or business loan. This is how foreclosure can have long lasting effects on your future.


Lastly, the time frames between pre-foreclosure and foreclosure can significantly vary.

Pre-foreclosure is longer than foreclosure in most cases. The purpose of the pre-foreclosure process is to give homeowners time to make payments, save money, or come to some other agreement with their mortgage lenders if possible.

Generally, pre-foreclosure lasts between 90 days and six months, depending on your state of residence, the policy of your lender, and a few other factors. 

If you have a good relationship with your lender or believe you have the means to redeem your mortgage, they may extend the pre-foreclosure period to give you a little extra wiggle room.

Once foreclosure begins, things move much more quickly. If you default on your mortgage loan for over six months, your lender may petition the court for eviction rights. After that, foreclosure usually only lasts a few weeks to a few months.

Contact Balance Today

If you’re in the midst of the pre-foreclosure process and you can't figure out a way to make your mortgage payments, Balance may be able to help. When you contact Balance, we will evaluate your property to see if we can make an equity investment in your home. If we do, we’ll replace your mortgage as a silent co-owner and pay off your current mortgage to stop. 

Balance invests in your home in exchange for an ownership interest in the home. As a co-owner, Balance shares in the costs, appreciation, and depreciation of your home. Sharing in your future home appreciation allows Balance to offer affordable terms with low monthly payments and flexible qualifying criteria, like no minimum credit score. 

In exchange, you can continue to live in the same property and remain an owner. You’d pay a monthly fee to us that covers taxes, insurance, and occupancy fees. 

Unlike other options where you may be forfeiting your home, Balance allows you to keep your home and access your equity to consolidate debt, repair the property, build credit, a savings, and fix your overall financial profile. You’d be joining many other homeowners who have experienced the benefits of a co-ownership with Balance. 

Do you want sole ownership of your property’s equity in the future? No problem. When you work with Balance, you can purchase our equity at any time and completely buy us out of ownership.

Contact Balance today to get started, get out of pre-foreclosure, and avoid foreclosure altogether.


What Is Pre-Foreclosure? | Experian

What Is Foreclosure and What Is the Process Like? | Nolo

Foreclosure: Definition, Process, Downside, and Ways To Avoid | Investopedia

How Long Does a Foreclosure Stay on Your Credit Report? | Experian

Foreclosure: What It Is And How It Works? | Forbes Advisor

Foreclosure Process | U.S. Department of Housing and Urban Development