As a real estate agent I cannot offer legal advice, I can say that in Maryland a lender cannot begin foreclosure proceedings until you are 90 days late. From there it takes another 3-4 weeks before an auction can take place and another 30 days for the sale to be ratified by the courts.
First you need to decide if you want to keep the home. Depending on your situation you may qualify for a loan modification which could possibly reduce your payments to 31% of your current gross income. There is specific criteria that must be met and much of that depends the type of loan you currently have.
If you do not want to keep your home or feel you can't, you may have options to do a short sale or a deed-in-lieu of foreclosure. A short sale is where the home is sold for less than what is currently owed and a deed-in-lieu you basically are giving the house back to the lender. Beginning April 5th (and in some cases sooner) there will be new guidelines in place regarding short sales and deed-in-lieuâ€™ s which will hopefully make the process much easier than it has been in the past. The new guidelines are not mandatory for lenders to follow, however my research tells me that about 85% of lenders have agreed to participate. In the new guidelines there is an allowance for a seller to receive $1,500 back to use towards relocation expenses.
All of the options available will affect your credit, even a loan modification. Loan modifications are supposed to reflect the least amount of damage to the credit, followed by short sale, then deed-in-lieu and finally the most damaging, foreclosure. Under short sales, deed-in-lieu and foreclosure you would be able to purchase another home in the future, but each process carries its own waiting period and requirement of re-established credit. FHA recently announced that if you are not currently behind on your mortgage and need to do a short sale, they will allow one to immediately re-purchase another home so long as they meet the regular underwriting criteria.
Cathy, I am local to your area and if I can be of any assistance to you, please do not hesitate to contact me. I also have an informational website that will explain things in more detail, just long onto mdforeclosurealternatives.com.
Foreclosure does ding the credit pretty badly, but it does not necessarily mean you can't ever buy a home, a short sale is easier to recover from, that is where the bank will accept less than what is owed. I always advise people to speak with their attorney on these matters.