No one who buys a home plans to lose it. However, following a period of aggressive lending practices and higher than expected interest rates, home foreclosures have significantly increased in the United States in recent times. More and more families are finding it difficult to meet their mortgage repayments, putting them at risk of experiencing foreclosure. However, losing your home is not inevitable, and in this article I'll explain how you might avoid foreclosure.

Firstly, a quick overview of the foreclosure process. It begins when you fall behind in your mortgage repayments. Because your bank (or other lender) loaned you a large amount of money to buy your home, with your home as security, the bank has the right to sell the property if you fail to meet your loan repayments. So, if you do fall behind, the bank is likely to send you a notice stating that they are commencing foreclosure proceedings. Unless you take steps to avoid foreclosure from happening, the bank will proceed to sell the property at a public auction or trustee sale. You will lose your home and may still end up owing the bank money.

You can probably appreciate that you really want to prevent the bank from beginning foreclosure proceedings to begin with. So the first step to avoid foreclosure is to be alert to the warning signs of one occurring. The initial, and most obvious, warning sign is your own inability meet your periodic mortgage repayments. It's crucial that you don't ignore this, or let your repayments slide even further. That will just make it more difficult to have your loan reinstated after foreclosure proceedings have commenced.

It's still a good idea to be absolutely certain that the situation is hopeless before assuming that you can't avoid foreclosure. Can your spending in other areas be cut? Is there a second car or other major (but non-essential) asset that can be sold? Can a spouse obtain a second job? Now is the time to take a hard-nosed look at your financial situation and make whatever changes are needed to ensure you don't lose your home.

On the other hand, if you suspect that, realistically, you won't be able to meet the current payments each month, don't delude yourself! Rather than hope the problem will go away (it won't), it's best to contact the bank immediately. Explain the situation to them. It's possible that you can renegotiate the terms of your loan or repayment schedule to enable you to keep your house and avoid foreclosure. In the same spirit, you also want to be open to any suggestions made by the bank. When they send you the initial notice of foreclosure proceedings, they will probably provide information about how you can avoid foreclosure. Be willing to discuss your options with the bank, so you can come to an arrangement.

If you can't negotiate a suitable alternative arrangement, make sure you don't ignore any other correspondence from the bank. For example, if you receive a notice of pending legal action, be sure to respond as required. A failure to appropriately respond to such notices will decrease the probability of being able to avoid foreclosure.

Meanwhile, it behooves you to be aware of both your mortgage rights and your options to avoid foreclosure. Make sure you understand your loan agreement, and the foreclosure laws and timelines in your state. Also know that once the notice of foreclosure has gone on the public record, you may be approached by foreclosure prevention companies or property investors wanting to buy pre-foreclosure properties.

Foreclosure prevention companies will offer to negotiate with the bank on your behalf in return for a fee. Since this fee can be rather large (sometimes 2 or 3 times a monthly repayment) you may be much better off negotiating with the bank yourself and investing that fee into paying back your loan! On the other hand, if it looks as though you won't be able to avoid foreclosure, you may be able to sell your home to a property investor and recover more than you would otherwise. Just be careful - pre-foreclosure investors will be aiming to get the best deal they can out of you. Meanwhile, you don't have to wait for them to come to you - you can put your home on the market yourself.

In general, your best chance to avoid foreclosure is to confront your financial difficulties and be open to suggestion for how to overcome them. Losing your home is no fun, so do what you can to avoid it.

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