1. Be proactive about the problem when the first warning signs appear. Not only does this reduce the stress of not knowing what is going to happen but it makes it easier for creditors to work out a plan.
2. Contact your lender when you become aware that you have a problem. The last thing that a lender wants is to foreclose on the property. Financial institutions lose a significant amount of money by foreclosing on a property ($50,000+/-). Foreclosure is a lose/lose for the lender and the homeowner. It is important to be honest and forhright with your discussions and be prepared to discuss the reasons for your problems.
3. Read the mail. Not knowing does not solve the problem it just delays the final result and increases the pain. By not reading the mail a person avoids the opportunity to get help before is too late.
4. Contact HUD approved housing counselor or call a REALTOR for advice. Call 800-569-4287 to find a nearby counselor, or go to www.hud.gov
5. Prioritize your spending by paying for the necessties of life first. Always pay the house payment and health insurance.
6. Look for ways to generate cash. Sell those items that have value but are not used or needed, or seek a part time job to get through the crisis. Not only does this reduce the emotional and finacial stress but it proviodes evidence to the lender that the borrower is proactively seeing a way to remedy a bad situation.
7. Don't get scammed by a private "foreclosure prevention specialist," instead go to www.hud.gov to obtain valid information about foreclosure prevention.
8. Make an appointment with a REALTOR to discuss the problem and to get their advice.

 A comparison or ratio of gross income to housing expenses; With the FHA, the monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non housing debts should not exceed 41% of income. www.hud.gov

Example.

 Conventional financing limits are typically 28/36

VA limits are only calculated with one DTI of 41. (This is effectively equal to 41/41, although VA does not use that notation.)

* To apply for a Loan Modification you need to take these equations into consideration, if you are out of work Loan Modification is out of the question.

In order to qualify for an FHA mortgage for which the lender requires a debt-to-income ratio of 29/41:

• Yearly Gross Income = $45,000 / Divided by 12 = $3,750 per month income.
  • $3,750 Monthly Income x .29 = $1,087.50 allowed for housing expense.
  • $3,750 Monthly Income x .41 = $1,537.50 allowed for housing expense plus recurring debt.

• Credit card debt out of control. (Maxed out Cards). Paying the minimum amount due.
• Paying for necessities with credit cards (groceries, utilities, etc).
• Cannot meet monthly financial obligations (choosing which bills to pay).
• Borrowing from friends and family.
• Loss of employment, or reduction in hours or wages.
• Major illness which can cause loss of work and an increase in health expenses.
• Divorce, separation or other traumatic family or personal situations.
• Death of spouse or significant other.
• Cannot pay the new Adjusted Payment on the ARM (Adjustable Mortgage Loan).
• Major unbudgeted maintenance expense.
• Excessive debt is the number-one cause of financial collapse and foreclosure.

• Bring your loan current and maintain regular payments in a timely mannetr.
• Work out a repayment plan.
• Refinance your home with better rates and terms.
• Modify your current loan with your lender.
• Rent your home and make the mortgage payments to your lender.
• Sell your home and payoff the loan amount due.
• Borrow money from a relative of friend to bring your payments current.
• Get protection under the Service Members Civil Releif Act (SMCRA).
• Enter in a Deed in Lieu of Foreclosure of "frienly Foreclosure".
• File for Bankruptcy protection to stall the foreclosure process.
• Sell your home in a "SHORT SALE" if the lender will accept a discounted payoff for the outstanding mortgage due.