When you sign a mortgage agreement, you're agreeing to pay the mortgage lender back until the debt is paid off. If you miss a payment, the lender may start the foreclosure process. That means you no longer own the home and are forced to move. The lender then tries to sell the home. If the sales price is less than your remaining debt, you may be responsible for the difference.

Foreclosure isn’t your only option. Your lender and housing counselor will talk to you about ways to avoid losing your home. Options vary depending on the type of loan you have. For information about FHA loans, click here.

Foreclosure will remain on your credit history for seven years. This will make it difficult for you to convince lenders that you are a good risk for future loans.

Foreclosure proceedings can happen very quickly. If you are struggling to pay your mortgage and other bills, it is important that you make an appointment to meet with a housing counselor promptly. The longer you allow bills to pile up, the more damage will be done to your credit. A counselor will help you set up a budget and even go with you to talk to your lender. Don’t let the situation get out of control before you do something about it.

If you’re behind, you also need to contact your lender immediately. Explain the financial problems that have led to your late payment. Try to work out a plan so you can get caught up in a reasonable amount of time.

Your lender may suggest one of the following options:

• Payment plan – an agreement with the lender to make up missed payments by sending extra partial payments each month
• Forbearance – an agreement with the lender to allow an individual to skip a payment and make it up later through a payment plan
• Loan modification – an agreement that changes the terms of the loan, such as the interest rate or the payment amount
• Partial claim – an agreement with the mortgage insurance company to grant an individual a second loan that will be repaid once the financial problems have been solved

Beware of scams that target vulnerable homeowners. Predatory lenders will take advantage of your situation if you are not careful. To learn how to protect yourself, click here to read about predatory lenders.

For more information:
Help for Homeowners Facing the Loss of Their Home, U.S. Housing and Urban Development.