What happens if I default on an FHA loan?

If you default on an FHA loan, serious consequences may occur. The Federal Housing Administration (FHA) is responsible for insuring these loans provided by approved lenders. In case of default, the lender can start foreclosure proceedings to recover their investment. This process involves selling the property to recoup the unpaid loan balance. After foreclosure, the borrower may be evicted and risk losing their home. Additionally, defaulting on an FHA loan can seriously damage the borrower's credit score, making it challenging to obtain future loans or credit. The FHA offers various programs to help borrowers facing financial difficulties, such as loan modifications or partial claims, which work towards avoiding foreclosure. It is important to communicate with the lender to explore available options and prevent defaulting on the loan.