Can you stop a foreclosure on your home?

The process typically begins with a letter or phone call from your lender after your payment is more than 30 days late [source: HUD]. However, this does not mean you are in foreclosure. You still have time to speak to your lender and work out a payment plan or alternative solution -- or simply make the payment to bring your account current. Since the foreclosure timeline varies by state, it's important to contact your lender and your state's government housing office to fully understand your options and the amount of time you have before official foreclosure begins. A basic timeline outlined by the U.S. Department of Housing and Urban Development (HUD) estimates three missed payments -- or 90 days -- before an official demand letter or notice to accelerate is issued [source: HUD]. After receipt of this letter, you'll usually have 30 days to make your missed payments or contact your lender to work out a plan. If you do not respond after the 30 days offered by the demand letter, your lender will more than likely contact their lawyer and begin foreclosure proceedings [source: HUD].

If you do go into foreclosure, your credit score will be affected drastically, and will usually decrease between 200 and 300 points [source: Silberstein]. And even if your financial situation turns around quickly, you credit score probably won't recover for as many as seven years. This low credit score will make it difficult to buy a car, a new home, or even apply for credit cards or loans. Of course, the fear of homelessness aside, the affects a foreclosure has on your credit should have you running to your lender for advice. We'll discuss the many options available to help you stay in your home and avoid foreclosure next.

If you're serious about staying in your home, the first thing you should do is ask your lender what your options are. The sooner you address the issue, the better. You don't have to wait until you've missed a payment. As soon as your financial situation changes, talk to someone. If you're not ready to talk to your lender, go to a financial adviser, housing counselor or even a lawyer. HUD recommends several emergency mortgage assistance programs like HOPE NOW and the Homeownership Preservation Foundation, which provide resources during your struggle to pay your mortgage. However, they are most helpful if you are having trouble coming to an agreeable plan with your lender.

And beware of foreclosure scams. Emergency mortgage assistance programs are free-of-charge. Don't pay for any advice or services you could get for free from your lender or a government resource. And, most importantly, do not sign anything you haven't read or don't completely understand. Scammers have made a killing off of the confusion and fear surrounding foreclosure. Your bank and federal and state government have many programs in place to help you stay in your home.

If you have an FHA-approved loan, there are many options available to you through HUD. If your financial strain is temporary, your bank might grant you a temporary reduction or even suspension of your payments, known as a special forbearance, to help ease your financial strain until your circumstances recover [source: HUD]. Another option is a one-time, interest free loan from the FHA, known as a partial claim, to help you cover missed payments and get you back on track to paying off your mortgage. The FHA's Home Affordable Mortgage Program (or HAMP) may even increase the amount of this one-time loan to help lower your monthly statements [source: HUD].

If you have a conventional, non-FHA loan don't worry. There are programs in place for you as well. You'll just need to talk to your lender about their unique offerings. Many banks offer programs identical to these FHA options to their conventional loan holders. You might even avoid foreclosure without the help of your bank or the government by simply reworking your finances. Don't rule out selling anything you can part with, cutting down on your expenses, or finding a second job to help you make your payments and keep your home.

A pre-foreclosure or short sale is also an option for those who know they can no longer afford their home. If you have a lot of savings in your home, the bank will take what's left on the mortgage from the sale amount and allow you to keep the difference. Or, if the home sells for less than you owe, most banks will forgive a reasonable difference [source: Chicago Tribune]. For those who are in way too deep with no hope of recovering any equity from a sale, a deed-in-lieu could be a final attempt to avoid foreclosure. With a deed-in-lieu, you voluntarily hand your deed over to the bank. While this option leaves you empty-handed, you're at least saved from the credit implications of foreclosure [source: Hobson]. There are many options available to help you stop foreclosure; you just need to find the one that's right for you.