What does a foreclosure mean?

Foreclosure is the legal process that happens when a homeowner can’t keep up with their mortgage payments, and the lender takes ownership of the home to recover the unpaid loan amount. Essentially, if a borrower falls significantly behind on payments and can't work out an alternative payment plan with the lender, the lender has the right to repossess the home and sell it to cover the debt.

Foreclosure can have serious impacts on a homeowner’s credit score and may make it harder to qualify for loans in the future. Many lenders try to work with homeowners before starting foreclosure, often offering options like loan modifications, repayment plans, or temporary forbearance. But if these options don’t work out, foreclosure may become the last step to resolve the unpaid mortgage.