Avoid Foreclosure
by Susan Molthop

[If you're having trouble paying your bills on time, you aren't alone. Usually, this situation is mild and temporary, and a little juggling will get you through. If that's not the case, and you're having trouble making your mortgage payments on time, the situation is much more serious and could lead to foreclosure.

The good news is that the people holding your home mortgage don't want to foreclose, foreclosure takes a long time, and you have many opportunities to rescue your home before it's gone. The bad news is that a foreclosure is very damaging to your credit rating, causes you to lose the equity in your home, makes it more difficult to buy another house, and results in additional expenses when you have to move. Avoid foreclosure if at all possible. Here are some hints and resources:]

The first thing to do is stop spending money on anything you can live without. Beware of the attitude that it's "just a few dollars more, so what can it matter?" EVERY DOLLAR MATTERS. Make that your new motto.

If you have contracts with companies for leased cars, cell phones, satellite Internet providers, etc., you may have to cancel them and take the consequences. It's better than losing your home. I spoke to 3 of these companies while researching this article. They all have departments that will work with people having money problems. They all charge a cancellation fee if you break your contract. If you can't pay the fee, they may send you to collections and ding your credit. If giving up these things will save your house, it's probably worth it, since none of these things appreciate--real estate does.

If your financial problems are long-term and not through any fault of yours, such as a an accident that caused you to lose your job, permanent disability, death of a spouse resulting in loss of income, or some other personal tragedy, even utility companies will work with you to lower your monthly payments. Call your local social services organization for information on these programs as well as free or reduced cost medical insurance and food stamps.

The second thing to do is to bring in more money. Have a garage sale. Do some moonlighting. Get a second job. Rent out a room. Rent out storage space in your garage. Sell some of your expensive toys or collectibles. Call in any loans from people who owe you money.

You may also be eligible for financial assistance through your church, fraternal organization, local or federal government. You may have to spend hours on the phone or online, digging for these programs, but you may find it well worthwhile. DON'T PAY ANYONE TO FIND THESE FOR YOU. There are scam artists everywhere, promising the moon. They don't deliver.

The third thing to do is to balance your check book, figure out your bills, and look ahead to any big expenditures looming. In other words, make a budget. If you really are losing this war, you must know all the facts, so you can plan an orderly retreat. Giving up in a last minute panic will just make things worse.

If things are still looking bad, it's time for some expert advice. DON'T PAY ANYBODY ANYTHING, YET. There's excellent FREE help available to get you started.

As usual, the best place to begin is HUD. They have information online, counselors available and a toll-free number to call.

Your next stop is FHA. This isn't fun reading, but it's very important. The more desperate your situation becomes, the more information you need.

Here is a similar foreclosure explanation from Freddie Mac.

They all agree that the first thing to do if you anticipate problems in making your mortgage payments is to CALL YOUR LENDER. Working with you is part of their job and a requirement for federally insured mortgage programs. You may be embarrassed, but they should be gracious and helpful. If not, contact HUD or FHA to report the problem and find out how to proceed.

If nothing else works and you must sell your home, contact a licensed Realtor who specializes in foreclosures, like Ed Molthop. He can help determine how much your house is worth and how long it could take to sell.

Almost everyone gets into a financial bind at some time in their lives. If you handle your situation with dignity, knowledge, and persistence, you'll make it through with the least damage done.