Can't make your housing payment, here's what to do today

For most people, their housing payments are their biggest monthly payments each month. Yet sometimes, making the monthly housing payments is difficult and you find yourself in danger of not being able to pay your mortgage.

If you find yourself in a situation like this, there are many options to help you save your home or, in the least, avoid foreclosure. Foreclosure occurs when you have defaulted on your mortgage payments and the bank arranges to repossess and then sell your home in order to collect the money owed to them. Not only do you lose your home in this scenario, but your credit will also be damaged. A foreclosure will stay on your report for up to seven years and cause your score to drop an average of 200-300 points. After that, it will be at least three years before you can qualify for another home loan at an affordable interest rate.

If you can't make your housing payments, you still have a number of options available to you without having to deal with foreclosure. The key is to address the problem early and be upfront and honest with your lender. The following are things you need to do today if you can't make your housing payment.

Determine why you can't make your payments
There are a number of reasons people have difficulty making their mortgage payments. In order to know which direction you should take, you will need to determine which category you fall into. For example, if you received an Adjustable Rate Mortgage, only to find that it reset and you can no longer afford your payments, or if you realize you simply purchased more home than you can realistically afford, then it might make the most sense to sell your home and purchase one that you can afford.

However, if your financial situation is temporary and the result of the loss of a job or an injury, it will probably be feasible for you to keep your home; you will just need to work with your lender to discuss your payment options and avoid going into foreclosure.

Keep in mind that missing a mortgage payment, or even two, will not send you into foreclosure. The foreclosure process as a whole can take up to six months to finalize, depending on your state, and does not begin until you have missed three to six housing payments. At this point, however, late charges, interest, and back payments have accrued, and it will be difficult for many people to come up with enough money up front to save their homes. For this reason, it is important to stay on top of your payments and keep the bank notified the minute you realize you will be unable to make your housing payment.

Prioritize spending
In some cases, you can still make your housing payment if you simply redo your budget and prioritize your spending a little. For example, it may be necessary to cut such unneeded things that are costing you money each month, such as cable television, gym memberships, or eating out. Sit down and redo your budget and see where you can cut costs in order to make your mortgage payment. If you are not using a budget to track your expenses, now would be an excellent time to start. There are many resources for smart budgeting that will be helpful at this point. Check online for websites, or use a money management software.

If you redo your budget and find that you will still have trouble coming up with a mortgage payment, making your housing payment (after medical care, if applicable) should be your first priority. This applies even if you have to delay making payments on credit cards and other unsecured debt. If you are going to do this, you should call your creditors and work out a payment plan. Once they know that you have every intention of paying your bills, you will find that most creditors will be more than willing to do this.

Look at your assets
You will also want to consider selling anything you may have in order to make your mortgage payments. For example, if you are making payments on two cars, consider selling one. The money you save on monthly payments for your car as well as the insurance could be enough to help you make your housing payments.

It may be necessary for a short period of time as well to take on a second job, or a job that may not pay as well as you are used to until you find something else. It is better to take a minimum wage job for a few months in order to meet expenses than to wait around until you find a better paying job.

Contact your lender
If you know you will be unable to make your housing payment, you should contact your lender or bank right away and let them know there is a problem before you start getting calls and letters from the bank telling you your payments are due. This is important for a number of reasons. First, it shows them that you want to keep your home and that you are serious about making your payments-you would be surprised how many people just ignore the problem. Second, the sooner you let your lender know you won't be able to make your housing payment, the more options you have before the foreclosure process begins.

Mortgage experts and financial consultants will agree that the bank does not want your home, so in most cases they will be willing to work something out. There are a number of options you can discuss with them, including:

• Refinance your home. One option your bank might be willing to do is to refinance the remaining balance of your home. This new loan will most likely be a longer term; say, a 30-year mortgage as opposed to a 15-year one. Many people don't like this idea, as it means ultimately the longer term and interest rate means you will pay more for the home. However, if your financial situation is temporary, once you are back on your feet again you can make larger payments.
• Forbearance. If you can prove to your lender that your financial situation is temporary and that you expect it to improve, sometimes they will be willing to put the loan into forbearance, meaning you will not have to make housing payments for a period of time; for example, you may not have to make any payments for six months, then when the seventh month begins, you will start making your mortgage payments. The balance you owed over the last six months will then be spread out over a longer period of time.

If you still can't make your payments...
If you contact your lender and can't come up with a solution, or if you determine that your situation isn't temporary and you simply can't afford your house anymore, you will probably need to walk away from your home and find something more affordable. This is clearly not the most desirable option, but it is better to do it than to have a foreclosure on your credit rating for the next seven years.

In order to preserve your credit and avoid the foreclosure process, there are a number of things you can do:

• Sell your home. Selling your home before foreclosure allows you to pay off your mortgage in full and, if the housing market is good in your area, you may even make money to put as a down payment on a home you can afford.
• Consider a short sale. If you owe more on the house than it is worth, or if the market in your area is poor, some lenders will agree to a short sale. With this, you will sell your home for less than the balance owed on your mortgage, and then pay the difference to your lender over a period of time. The payments you make on a short sale will be much less than you would on an actual mortgage, and you will avoid having a foreclosure.