Take steps to avoid foreclosure

If you’re behind on your mortgage, you’re in danger of losing your house and damaging your credit for years to come. How quickly that can happen depends what state you live in. Some states are more lenient than others, but if you don’t act quickly, the end result will be the same.

•The most important thing is to pay attention to the letters you’ll get from your lender. Don’t ignore them. Contact the lender and let it know your situation. Have the facts and figures in front of you: what caused you to miss payments, how much your current income is, how much you can pay. There are a number of ways you can avoid foreclosure and the resulting damage to your credit.

•Modify the loan: If you can refinance, your payments can possibly be reduced by extending the term of the loan or lowering your interest rate.

•Forebearance agreement: Ask your lender to take lower payments for a period of time. It usually won’t be long, perhaps a few months, but that could allow you to get back on your feet.

•Sell the house quickly: A “short sale” means you sell for less than the market rate and won’t get all your equity, but you’ll be able to pay off the lender.

•Deed in lieu of foreclosure: You give the house back to the mortgage holder.

•If you have a HUD loan, you have options. You might qualify for a one-time payment from FHA to bring the mortgage current. You’ll sign a promissory note, and they’ll put a lien on your house to be satisfied when the house is sold.

•If you’re facing foreclosure, it will become public knowledge when the notice is printed in the newspaper. Beware the vultures that will come to your “aid.”

You’ll likely hear of every scam there is. A common one is an offer to take over payments; all you have to do is sign on the dotted line. Once you’re out of the house, however, your “benefactor” will rent it out for a short period of time, take the money and never make the mortgage payments. The house will go to foreclosure anyway.

Best bet: Work with your lender to see if the situation can be saved.