In the current troubled economic times, foreclosures are at an all-time high in America. Your home is not just an investment – it’s where you and your family live. For that reason, you want to take steps to prevent its loss.

Job loss or change is one of the top 4 most stressful events in an individual’s life. Coupled with another of the top 4 stressful events, which is financial difficulty, it’s easy to understand why the chain of events that may lead to impending foreclosure can throw someone into anxiety, depression and desperation.

The first step to avoiding foreclosure unfortunately takes place at a time when few people consider it: at the time of purchase. By the time you’re reading this Foreclosure Resource Guide, you’re probably way past this point. However, it’s worth discussing for those who may be looking at buying their first home, seeing the current foreclosure rate and economic crisis, and wondering if it’s a good move on their part.

Can you afford that home?

This is the first question you need to ask yourself. Part of the current economic crisis is due to mortgage lenders ignoring debt-to-income (DTI) ratios and making loans to people who simply could not afford to make the payments. What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. To get an idea of what you should be able to afford, try this Ginnie Mae calculator – and then set your sights accordingly.

Adjust your expections – do more with less

Americans tend to live in a lot more space than our European counterparts. Ask yourself if you really need the type of home that’s going to cost you more than you can afford. If you’re buying a 2-bedroom condo and you have one child, take into consideration how much growth your family will sustain in the space you’re purchasing. In spite of what they may tell you when they’re teenagers, it won’t permanently damage your children’s psyche to share a room with a sibling! By the time things really start feeling crowded, you may be able to afford a move up.

Sell it before you buy it

This was the best advice I’ve ever received from a realtor. When you’re looking at property to purchase, view it as a seller, not a buyer. When you want to sell that home in 5, 10 or 15 years – what will it look like to a buyer? I found a home I absolutely loved – until I found out a railroad track ran right behind the wall in the back yard. Still, I loved the home, so I asked all the neighbors how they dealt with the noise of the train. They all assured me they got used to it. Then I stepped into the shoes of a seller and asked myself how hard it would be for me to sell that house. If I was reluctant about buying it because of the railroad tracks, I was pretty sure other potential buyers would be equally reluctant. The realtor and I kept looking.

Understand the loan!

I’m going to repeat that: Understand the loan. Make certain you understand all the terms of the loan and how it works. If you don’t understand loans, keep researching and reading or ASK someone who does! Many of the loans that have been made were made to people who had no understanding that the low payments that looked so attractive at the outset were going to balloon into payments they simply couldn’t afford to make in 2, 3 or 5 years.

The mortgage lenders want your money. They get paid their fees whether or not you can afford to keep your home in 5 years. Don’t take financial advice from them! It’s your responsibility to make sure they provide you with complete and accurate information about the loan you are trying to obtain – and whether or not you can afford it.

Bad things happen to good people

It’s true. People suffer job loss, health problems that impact income and other unforeseen events that may result in loss of financial stability. You can do absolutely everything right and still be facing foreclosure of your home. If you’re careful with your money, have adequate savings and aren’t overextended, you can weather the bad times more readily.

Almost everyone has a time in their lives when things don’t go according to plan.  Maybe you lose your job, or you have a major illness in your family and your finances take a beating.  If this happens to you, and you find yourself getting behind in your mortgage payments there are a few things you can do to ward off the foreclosure on your home.

Of course one thing you can do, is to sell your house.  Depending on the market conditions you may even be able to make some money in the deal.  If you can’t keep up with the mortgage payments and want to sell your house as a resolution, you need to be realistic about the price it will sell for because time is of the essence.  The more months your house is on the market the closer you get to foreclosure and if you wait too long the decision will be out of your hands and the foreclosure auction will be imminent.

Another thing you can do is talk to your lender and see if they can change the terms of the loan.  This could work if you only have a temporary setback and you will be able to get back to paying them, or if your income has gone down a little bit and you can still pay a mortgage but not quite at the amount it is now.  Banks don’t really want to go through the foreclosure process so, most of the time, they are happy to work with you to come up with terms that you can both live with.

A loan modification could include extending the term of the loan to add on extra payments or to make your payments smaller by adjusting the interest rate  or taking some of the equity that you already have and refinancing into a longer mortgage.  Of course, if you want your lender to be reasonable about this you need to provide them with proof that you are making good-faith payments and that you will be able to make the new payments given your current finances.

If you’ve missed a couple of payments but are now ready to get back on track, you might be able to have your lender give you a repayment plan where a set amount is added to your normal payment which repays the amount that you are behind, this way the missed payments are spread out over a certain amount of time and you don’t have to come up with a large lump sum of money to become current.

If your income is temporarily reduced you might be able to have your mortgage payments suspended for some amount of time.  After the suspension you will agree to pay the lender the total amount that was missed during the suspension and then resume your normal payments.  Of course, this only makes sense if you’re income is going to go back up to its prior amounts and if you’ll have the lump sum of money to pay them.

Getting behind in your mortgage payments can be stressful and if you have a reduction of income it can have a snowball effect were suddenly the fees and late payments are adding up to so much that you’ll never be able to make the loan current.  In this case, there may be no other option but foreclosure.  However, foreclosure is something that should be avoided at all costs if possible.

When you can no longer pay your mortgage, the mortgage company has every right to sell off your home for the money that is due them.  This process is called foreclosure and it starts with a notice of default being filed.  Unfortunately, by the time it is gotten to this, you’re probably well behind in your payments and your only hope is to be able to somehow give them back their money in order to stop the foreclosure process and the resulting action on your credit report.

While the situation may seem bleak, there are a few things you can do.  If you know you won’t be able to pay your mortgage at all then the only thing you can hope for is to get out of the foreclosure so that you leave the situation with your credit intact.

Of course, one way to do this to sell your home so that you can pay off the bank.  This can be time sensitive because by the time your getting the foreclosure notices there’s not a lot of time to actually find a buyer and go through with the sale before the foreclosure auction happens on your home.  Therefore, it’s imperative that you get a good mortgage broker and list the house at a price where it will sell quickly.

Another thing to consider is a short sale.  While this does affect your credit, it’s not as severe as a foreclosure and may be a lot less stressful for you as well.  In a short sale, basically, the lender is saying that they will accept less than the total amount due.  If you are able, you can pay off the loan and move on to something else.  However, not all banks will accept a short sale and it really depends on what is more financially appealing to them.

Another thing you could try is to get your lender to take back the deed.  This is called Deed-in-Lieu of Foreclosure and basically you just sign away your rights to the home and the lender cancels out the mortgage and stops the foreclosure action.  Unfortunately, this does affect your credit and probably looks just as bad as a foreclosure.

A foreclosure is not an easy thing to go through, but if you accept the fact that you can’t pay your mortgage at least there are a few things you can try to get out of it as gracefully as possible.  The less damage it can do to your credit the easier it will be for you to move on and get another place to live.

If your home is in danger of being foreclosed upon and you want to stop the process before it even begins you might consider loss mitigation.  This is a process whereby one tries to work with the bank to keep the homeowner in their own home.  While this might seem like something that you, yourself can do, be forewarned that loss mitigation is a complicated process and it’s best that you hire a professional with expertise in this area if you want the best outcome.

Anyone who is facing the loss of their home is bound to be overly emotional.  But when dealing with the bank one needs to be levelheaded which is why it’s recommended that you get a third party loss mitigation expert to go between you and the bank.  What this person will do is negotiate to find the best terms for everyone that will allow the bank to get their money and the homeowner to keep their home.

The first thing they will probably do is try to come up with a modification to the loan or some type of repayment plan that the homeowner can realistically abide by.  The problem here is that it also has to be agreeable to the lender who can often be unbending in their rules.  Sometimes they may be able to get the loan extended which will then lower your payments and other times it may include getting a second loan to pay off the amount you are in arrears.

Depending on your current level of income and how far behind you on your payments, it may not be possible to work out a payment plan that is reasonable for the homeowner and the bank.  In this case, the loss mitigator will work towards getting you out of your mortgage before foreclosure proceedings can mar your credit.  This could include finding a well-financed buyer for a short sale or negotiating a deed in lieu of foreclosure in which you convey the property to your lender who then can sell it to recoup their losses.

If you’re facing foreclosure, knowing the laws in your state and your rights when it comes to foreclosure is critical. While hiring someone to help you through the loss mitigation process might hurt you a little bit financially upfront, it’ll probably pay off in the long run because you end up getting a much better deal with someone who knows the rules and how to play the game.

In today’s troubled times, foreclosure is becoming more and more common. Unfortunately, a lot of people choose to bury their heads in the sand when they can’t make their mortgage payments and they only end up making things worse for themselves. If you are having hard times and you know that you won’t be able to make your mortgage, there are a few things you can do to get the bank to put off starting foreclosure proceedings on your home.

The first thing you want to do is stop them from filing a notice of default. The notice of default is the first step in the foreclosure process and lenders will file this when they don’t receive a certain number of mortgage payments.

You will get warning letters in the mail, but what you want to do is get in touch with your bank before they even send out the first letter. This will establish a good intent and will make the bank much more receptive to working with you. But before you go to the bank, you need to have some kind of a plan where you can get back on track which will be appealing to both you and the bank.

If you have fallen behind, but have money coming on the horizon either through a job or some other type of loan or the sale of another property or investment, let your bank know that you will soon be able to pick up payments and make up the difference. Between the two of you, you can work out a plan where you become current on your payments and will be able to resume as normal without the threat of foreclosure.

In some cases, the lender might waive a payment. This is when the bank simply lets you miss one payment and would be a good option if you are currently in between jobs but are starting another one so you know you will be able to pick up your payments again the next month. Admittedly, lenders are not too keen on doing this but you might luck out so you might as well try it if you think will work for you.

In some cases, you might get the lender to be able to change the terms of your loan to a smaller monthly payment that you actually can afford. Perhaps you’ve had a pay cut or your spouse has lost their job? Then this might be a good option. In this case the lender might freeze the interest rate or recalculate the loan adding on a few years at the end so that your payments are smaller.

In some cases, particularly if you have equity in the home and can show proof of employment, you might be able to get the lender to refinance the loan into a payment schedule that is more in line with your current income.

In order to make up for missed payments, you might be able to get them added onto the end of your loan or, the bank might agree to give you a separate loan for the total amount of the missed payments. Of course, if you can’t afford your mortgage now, than making this other loan – called a partial claim – is of little interest to the bank since they know you will not be able to pay back.

These strategies can be effective for people who have had a temporary reduction in income but will see more money in the near future either from a new job or the sale of something significant. However, if you aren’t going to be increasing your income to the amount you need to pay your mortgage in the near future you will need to try some other tactics to avoid foreclosure.