FORECLOSURE ADVICE

If you're at risk of losing your home, foreclosure advice may be something you don't want to hear. Why? Because foreclosure advice usually requires you to make some tough decisions.

The first piece of foreclosure advice applies to people who are shopping for a home: don't buy more home than you can realistically afford, and be sure you have a good handle on your financial situation.

But even the best plans can go bad. Expensive medical bills, job losses, and other unforeseen events can put anyone in the position of having to face the prospect of foreclosure.

You should realize that your lender does not want to foreclose on your home. The lender will have to sell the home, and will likely not recoup the losses. It's to the lender's advantage to help you stay in your home.

But your lender isn't a mind-reader. If you see that you're in trouble, it's up to you to take the first steps. Contact your lender to let him know that your payments will be late. If you receive letters or phone calls from your lender, respond to them immediately. Lenders appreciate cooperation.

Foreclosure advice for short-term problems:

If your financial problems are temporary, there are ways to work with your lender to stay out of foreclosure. One is called reinstatement. With reinstatement, if you're behind on your payments but can come up with a lump sum to pay off your past-due payments, your lender will reinstate your loan. Where would you find such a lump sum? Perhaps you can sell a car or other asset, get money from a friend or relative, or cash in a portion of your retirement savings. Think hard about where you might get money to pay your past-due mortgage payments; you might be surprised at your options.

You can also ask your lender for forebearance, which means that you will be allowed to delay your payments for a short time until another option can be found that will bring your mortgage payments up to date.

If you can now make your monthly payments, but still have payments that are outstanding, your lender may allow you to pay additional amounts on your monthly payment until your account is current.

Foreclosure advice for long-term problems:

If your financial situation is not going to get better in the foreseeable future, that doesn't mean that you're without options.

If you still have an income, your lender may work with you to modifiy your existing mortgage. If you're able to make your existing monthly payments, but cannot pay the past due amounts, your lender may agree to add the past due amounts to your existing mortgage and extend the mortgage period.

If you can't afford the existing payments, your lender may agree to change the term of your mortgage so that the monthly payments will be lower.

If the above foreclosure advice doesn't work, you still have the option of selling your home. You can ask your lender to hold off on foreclosure for a certain length of time to allow you to sell your home. While the notion may seem distasteful, you'll at least come out of the situation with less damage to your credit record. And, depending upon how far behind you are in your payments, you may come out of the home sale with a profit for yourself.

If you have an FHA loan, you may be able to receive a one-time payment from the FHA's insurance fund. In order to receive such a payment, your payments must be at least four months but not more than twelve months past due. You must also be able to prove that you'll be able to resume making full monthly payments on your mortgage.

The FHA loan insurance solution will require that you sign a note allowing the Department of Housing and Urban Development (HUD) to place a lien on your home for the amount you're receiving from the insurance fund. There's no interest on this loan from the insurance fund, but it must be repaid when you pay off your mortgage or sell your home. If you think this is a viable option, mention the FHA loan insurance solution to your lender.

If you have a veterans loan, the the VA offers counseling on ways to avoid foreclosure. Call 1-800-827-1000 to find the loan counselor nearest you.

HUD also offers counseling for people struggling with their mortgages. To find a HUD-approved counseling agency near you, click here.

No matter how you resolve your potential foreclosure problem, don't feel ashamed. Bad things sometimes happen to good people.