Early Steps to Prevent Foreclosure

You already know a Plan B is important, but what should it include? The first steps to take in creating your plan are to:

• Save money
  Put away some money each month to have an emergency fund in case something unexpected happens, such as losing your job. You should have several months of housing costs saved to protect you from unexpected financial problems.

• Reduce expenses
  Think about where you can save money; for instance, temporarily canceling cable or your gym membership. By paring down to the bare necessities, you may be able to save a significant amount of money. And even if it doesn’t seem like enough of a savings to make a big difference, remember – every little bit helps.

Use our budget worksheet [PDF 73K] to help think about which changes you can make if you find yourself facing financial difficulties.

If you've put your Plan B into action and still find yourself having trouble paying the mortgage, you should:

• Call your lender
  This is the single most important thing you can do. Lenders want borrowers, not properties – they would prefer to see you keep your home. Most will work with you while you get back on your feet.

• Be honest with your lender
  Different situations require different solutions. It will matter to your lender to know if your financial problems are temporary, for example, due to an injury that puts you out of work for a few months, or are more long term, such as a cut in pay or a layoff.

• Know what you owe
  Have a clear picture of what your debts are and make your mortgage the priority if you have to make choices. Debt collectors can be very aggressive, but if you can't pay all your debts, make sure your home is protected from foreclosure by paying your mortgage.

• Talk to a housing counselor
  A non-profit housing counseling agency may be able to help you restructure your bills so that you have an easier time paying them. Additionally, they can help you create a budget that suits your specific needs.

• Contact a housing non-profit
  A housing non-profit can give you valuable advice. The HOPE National helpline, 888-995-HOPE, is dedicated to helping homeowners facing foreclosure 24 hours every day. Spanish – speaking counselors are available.