A foreclosure happens when you are seriously delinquent on your mortgage payments, and the lender attempts to reclaim the property. If you or someone you know is facing a foreclosure in the near future, you should know that many options are available that help avoid losing your home, and most of them don't hurt your credit! Most of these options are for FHA loans but some may be applicable to a VA or conventional loan.

1. First of all, do not prematurely move out of your home, or you may not qualify for assistance. Most lenders have a Loss Mitigation Department that can provide you with some options. Find out their contact information and provide them with your financial situation or any extenuating circumstances. You'd be surprised at how much a single phone call to your LMD can help.

2. You may also contact a HUD approved housing counseling agency by calling toll free (800) 569-4287. They will provide you with the nearest agency to you. These services are almost always free of charge and can be a very beneficial resource if you use them correctly. They provide you with a wealth of information ranging from government aid to local community organizations that can help you.

3. If you have recently experienced a reduced income or an increase in expenditures, you may quality for what's called Special Forbearance. In most cases the lender can either provide you with a reduced payment plan or even a complete suspension of payments. You will however need to provide some kind of proof that you are experiencing financial hardships.

4. Your fourth option is what's called a Partial Claim. What happens is the FHA-Insurance fun can bring your mortgage up to date by giving you a temporary interest free loan. You may only qualify for a Partial Claim if you are over 4 months delinquent but no longer than 1 year. You are also required to make full mortgage payments after the lien is placed and your payments are caught up. The amount of the partial claim is due either when you sell the home or the mortgage payments are completed. If you choose this option make sure that your financial hardships are over because you will be required to make full mortgage payments after the Partial Claim is in effect.

5. Your lender may sometimes provide you with a Mortgage Modification which allows you to refinance the amount of the debt or extend the timeline of your loan, which will reduce payments.

6. As a last resort and after you've exhausted all other options above you may willingly give back the property to the bank. This is what's called a Deed in-lieu of foreclosure. In most cases your credit will not be harmed, but you will lose the home. You may not pick this option if you have any other FHA loan in default.

As you can see there are many options available that are much better than giving your house up. Best of all, if done properly the options listed here will not hurt your credit!

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