Keep the wolf away from the door.
As people struggle to make rising mortgage payments, and the number of homes entering foreclosure breaks records, homeowners are haunted by the vision of being thrown out of their homes.
"The biggest mistake people make is waiting until it's too late," said Paul Bach, a Northbrook, Ill., bankruptcy attorney.
Instead, explore the following:
Can you refinance?
If you have good credit, are not behind on mortgage payments, and know that those payments are adjusting to a level you cannot afford, try to get a new mortgage.
It's probably not going to be as easy as in the past. The housing mess has caused lenders to go out of business and remaining lenders have tightened qualifications for obtaining loans. That's one reason why it's critical to act while your credit history is in good shape.
Go to a bank or credit union that lends directly to individuals. Be suspect if a broker merely pulls your credit report. A serious one will verify your income, verify tax forms, and get an appraisal of your home.
To make sure the deal is solid, request a lock on the loan in writing from the lender.
Seek help from your lender.
If you can't refinance to easier terms, turn to your existing lender for some relief.
You probably won't be going to the lender directly, however. You will most likely talk to a servicer - the company that sends you your mortgage bills and collects your payments.
Call the servicer, using the telephone number on your mortgage bill, but ask to speak with the "loss mitigation department." This is the department that would have the authority to negotiate, said Odette Williamson, an attorney for the National Consumer Law Center.
Tell them: "I'm interested in doing a modification on my loan," she said. They might also refer to it as a workout.
You might be able to change an adjustable mortgage into a fixed-rate mortgage with a somewhat higher interest rate.
If you strike out with the servicer, try going to your lender directly.
Get help from a counselor.
To be successful negotiating with a servicer, you need to be prepared.
Before approaching the servicer, review your finances in depth so that you can tell them with certainty what you can afford, not afford, and why. That means doing a detailed budget.
If you don't know how to prepare a budget, you can find models on the Internet.
You also can receive help from a counselor approved by the federal government. You can find housing counselors who help people avoid foreclosure through the U.S. Office of Housing and Urban Development at www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm, or by calling 800-569-4287.
Besides budgeting help, these counselors can negotiate with your servicer. They will also be able to tell you whether you would be better off selling your home.
You can also find tips on negotiating through HUD, and through Freddie Mac, a firm that insures mortgages: www.freddiemac.com/corporate/buyown/engl ish/owning/avoid_foreclosure.html.
Another alternative for budgeting would be a nonprofit credit counselor found through the National Foundation for Credit Counseling (800-388-2227) or your local United Way.
Selling your home
If you can't modify your loan so it works, you might be able to get your lender to delay the auction on your home for 30 to 60 days while you try to sell your home.
If your servicer and lender won't provide relief, you can delay the foreclosure by filing for Chapter 13 bankruptcy.
Gail MarksJarvis writes for Tribune Media Services.