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Preventing Foreclosure

Even the word “foreclosure” may be enough to tie your stomach in knots. The truth is, it's a difficult and often painful process – but ignoring the signs will not make it go away. In fact, it's in your best interest to act quickly if you hope to avoid foreclosure.
So, if you're facing foreclosure, what should you do?

1. Talk to your lender

Don't wait until you've missed a couple of mortgage payments and don't wait until the lender calls you. Set your pride aside and call your lender as soon as you know you can't make a payment. Your lender does not want to own your home. The paperwork that goes along with a foreclosure, as well as the costs of marketing your property, will cost the bank thousands of dollars.

Your lender would rather work with you than foreclose on your home. Call and ask about your options, including forbearance, reinstatement, payment plans or loan modifications. If what they tell you seems complicated, ask them to break it down into simpler terms. You must fully understand what's happening so you can make a sound decision.

2. Contact foreclosure relief programs The Department of Housing and Urban Development's Federal Housing Administration has a website that provides advice to consumers facing foreclosure. Check the site to see if you might be eligible for loan balance reduction or refinancing. Many state government agencies also have free hotlines to help consumers facing foreclosure. Also, check out Zillow's page on refinancing options for underwater borrowers.
3. Get counseling

Credit counseling services can negotiate with your lender to help alleviate your debt. In most major cities, HUD-sanctioned housing credit counselors are also available to talk to homeowners about their options during foreclosure.

Be wary, though. Some counseling services are not on the up-and-up. Check with your local Better Business Bureau to determine whether the company is fraudulent. And don't sign anything without consulting your attorney.

4. Time for a gut check Can you honestly afford to keep this house? It really may be in your best interest to sell and start over. Each person's situation is different; talk to a trustworthy financial adviser about your circumstances. Be truthful – whether you're talking to your financial adviser, lender or credit counseling service. Their advice will only be valid if it's based on real numbers and facts.
5. Organize your debt

Prioritize your bills. Alert your utility and credit card companies and make them aware of your financial crisis. If you’ve lost your job but are busy interviewing for a new one, let them know that. Do not write bad checks in an effort to postpone disconnect notices. Late fees and bounced check fees will only add to your troubles.

Whatever you do, take action. Doing nothing will make a bad situation worse. Be proactive, and you may be able to avoid foreclosure and save your home.

This content is not, nor is it intended to be, legal advice and should not be relied on in lieu of consultation with an attorney. You should consult an attorney and/or a foreclosure specialist for individual advice regarding your own situation. The content may include links to other sites owned and operated by third parties. Zillow is not responsible for the content on such third party sites and does not necessarily sponsor, endorse or otherwise approve of the materials appearing on the sites.