How to Stop Foreclosure

1. Reach Out to Your Lender

Contact your lender or loan servicer about a remedy as soon as possible, and be ready to explain your financial circumstances. You may be able to reach an agreement on a payment plan, a temporary forbearance or a modification of the loan terms:

• Payment plan: You and your lender may be able to work out a way for you to catch up on past-due payments.
• Forbearance: If your lender agrees to it, forbearance allows you to temporarily pause mortgage payments or make lower mortgage payments, usually for up to 12 months.
• Loan modification: Modifying your mortgage changes the terms of the loan; a common example is the reduction of monthly mortgage payments.

If possible, reach out to your lender before you start missing mortgage payments. Once you begin missing payments, you may get a notice of default representing the first step in the foreclosure process. Some lenders send this notice to borrowers as a formal warning that the home will be seized if overdue mortgage payments aren't made by a certain date. This window of time is known as pre-foreclosure.

Tip: Don't ignore letters, emails and phone calls from a lender or loan servicer that's seeking mortgage payments. If you do ignore this outreach, the lender or loan service might proceed with legal action to initiate a foreclosure.

2. Seek Help From a Nonprofit or Government Agency

A number of nonprofits and government agencies can provide help if you're facing foreclosure. They often provide their services at no cost. Here are some nonprofits and government agencies that may be able to help you avoid foreclosure:

• A foreclosure prevention counselor approved by the U.S. Department of Housing and Urban Development (HUD) may be able to help.
• NeighborWorks America is a nationwide network of nonprofits mainly focused on affordable housing and financial counseling.
• Homeownership Preservation Foundation helps financially troubled homeowners avoid foreclosure.
• National Foundation for Credit Counseling is an umbrella organization for financial counseling agencies across the U.S.
• Federal Housing Administration National Servicing Center assists homeowners who have FHA mortgages.

Tip: Beware of "rescue" scams. Some for-profit companies that advertise themselves as mortgage consultants, foreclosure services or something similar may promise to "save your home" or "pay your mortgage," but they're likely just trying to rip off anxious homeowners.

3. Sell Your Home

Before your home is seized, you might be able to sell it to cover the mortgage debt. If the home ends up selling for less than what you owe, this is known as a "short sale."

A twist on this option is selling your home for equity. If you have equity in your home, meaning it's valued at more than what you owe on the mortgage, you might look into selling your home to wipe out your mortgage debt and keeping what's left (the equity).

The selling-for-equity option may be ideal if you're struggling with financial hardship and can't keep up with your mortgage payments. Aside from clearing away your mortgage debt, selling with equity steers clear of the severe credit harm a foreclosure would cause.

Learn more: How Does a Foreclosure Affect Credit?

4. Arrange a Loan Assumption

A loan assumption might be an alternative to an outright sale of your home. Your loan servicer may be willing to let another buyer take over your mortgage debt and mortgage payments, even if the mortgage started out as non-assumable.

Keep in mind that refinancing your mortgage typically isn't an option for avoiding foreclosure.

5. Agree to a Deed in Lieu of Foreclosure

A deed in lieu of foreclosure lets a homeowner voluntarily hand over their house to a lender in exchange for erasing their mortgage debt and avoiding foreclosure.

The deed-in-lieu process can help you avoid hassles associated with foreclosure, including court proceedings, court judgments and home auctions. Meanwhile, the lender can sell your home to recover at least some of the unpaid mortgage.

If you fall into any of the following scenarios, your lender might agree to a deed in lieu of foreclosure:

• Demonstrated financial hardship
• Delinquent payments for an extended period with no ability to make mortgage payments
• No qualification for loan modification
• Unsuccessful attempts to sell your home

Deed in lieu of foreclosure will still result in harm to your credit, but likely not as much as a foreclosure otherwise would.

Learn more: What Is a Deed In Lieu of Foreclosure?

6. Consider Hiring an Attorney

Depending on your situation, you might consider hiring a foreclosure attorney. You may even be able to find an attorney who provides services at no cost, or to get assistance from an organization that offers free legal aid.

A foreclosure attorney can help you understand your legal rights throughout the process and, in some cases, may be able to find a legal defense that stops foreclosure.

Foreclosure can be a complicated legal process for both the lender and the homeowner, and having a lawyer on your side can help. An attorney may come with a high price tag, but the cost may be worth it, especially if you think the foreclosure action is illegal.

7. File for Bankruptcy

Bankruptcy should be used as a last resort if you're facing foreclosure on your home.

Seeking Chapter 7 bankruptcy merely postpones a foreclosure. Meanwhile, Chapter 13 bankruptcy might let you catch up on past-due payments and keep your home. Chapter 7 bankruptcy wipes out most or even all of your debts, while Chapter 13 bankruptcy creates a plan for repayment of some or all of your debts.

Before you pick this option, weigh the serious consequences that bankruptcy has on your finances and creditworthiness, as it may take a long time to bounce back from a bankruptcy. A Chapter 7 bankruptcy generally stays on your credit report for 10 years, and a Chapter 13 bankruptcy typically remains there for seven years.

Learn more: Does Bankruptcy Stop Foreclosure?

8. Keep Up With Mortgage Payments

It may sound obvious, but regularly making mortgage payments is the best way to avoid foreclosure. Of course, this can be tough if you're dealing with financial hardship.

You may be able to find financial assistance that helps you take care of bills and other needs so you can more easily afford your mortgage payments. Or you might pick up part-time work, cut expenses and tame your debt to help generate more money and head off foreclosure.

Learn more: Options if You Can't Afford Your Mortgage Payments

Frequently Asked Questions

The Bottom Line

If you're on the brink of a home foreclosure or have already been through one, stay on top of your expenses so you can remain in your current home and regain financial stability. Even more important, don't ignore a foreclosure or pre-foreclosure (such as failing to read mail or answer phone calls from a lender or loan servicer). Doing so could make it harder to hang on to your house.

Throughout the process, and even long after, it's critical to keep an eye on your credit. Experian credit monitoring can notify you about credit score changes, new inquiries and suspicious activity detected in your Experian credit report.