It is a sad reality that many homeowners are having problems paying their house mortgages. Out of the around 120 million American homes, around 4.8 million (or 40%) are facing foreclosures. In fact, about half a million went through actual foreclosure last year. According to the US Department of Housing and Urban Development, foreclosure involves the auction of a property by a representative of the county court or the lender in order to satisfy the debt on the house. In short, foreclosure is the white flag of defeat on your house mortgage. It gives the lender the right to sell your home in order to pay off your mortgage. Foreclosure is a tedious and painful choice that no one wants anyone to make.

There are options that you can take so as not to go through foreclosure. When you foresee a problem regarding your mortgage payments, or are already in it, don't just do nothing or sweep the situation under the rug. Do something! A good experienced real estate company, can help you choose the wisest course of action. While they cannot promise that we can delay or stop the foreclosure process, they will however work with you and your lenders to find the best possible plan of action.

Here are some options you can choose to stave off a foreclosure:

Staying in the House.

? Reinstatement. If you can promise to take hold of a lump sum amount to pay off your mortgage delinquency, then a reinstatement can be done.

? Repayment Plan. A repayment plan can be negotiated if you are now able to commence with your mortgage delinquency. If the amount is too steep for you, it can be spread out for a period of time until you are once again updated with your payments.

? Refinance. This is when you get another loan at hopefully lower interest rate to pay off for the original mortgage on the house using the same property as collateral.

? Equity Loan. The equity of the mortgaged house becomes the collateral in this type of loan.

? Forbearance. When your situation looks like a temporary setback, or you're working to sell the property yourself, this option can be used. Here, the borrower may be allowed to pay a lesser amount for a certain period and a higher amount later on to pay off the delinquency. This can last from six to 18 months, depending on the borrower's circumstances.

? Short Refinance. In a foreclosure situation, a lender may not receive payment for up to one year, not to mention other expenses that may be incurred in the process. So a short refinance may be a better alternative.

? Mortgage Modification. This is one option to take when it looks like your financial situation will take a while to improve. In this case, either the interest rate is lowered or the mortgage plan term is extended.

? Use Your Military Status. Through a formal written request, as stipulated through the Service Members Civil Relief Act, the lender will lower down your mortgage interest rate to not more than 6% per annum while you're in active military service. You must have made the mortgage agreement prior to active service.

? File for Bankruptcy. Filing for a Chapter 7 Bankruptcy will provide you the chance to address the delinquency issue for a long period - from 30 to 60 months. However, since the mortgage terms remain, you may still not be able to pay off the mortgage amount plus the delinquency amount. This gives a severe impact on your credit rating. II. Relinquishing Rights to Property

? Sell Your Home. When your present situation looks like it will go on for a longer period of time, selling your home might be the best way out. This is a better alternative than a foreclosure as this won't ruin your credit rating.

Leaving the Home

? Deed in Lieu of Foreclosure. In this option, you hand over the deed of the property to the lender, for him to try to sell the property. Many lenders don't agree with this because they incur the cost of fixing the place as well as the real estate commissions. Another option that you can take is the short sale. Read further on as this is discussed separately.

Short Sale, otherwise known as pre-foreclosure sale, a popular loss mitigation tool of the 90s, is when a lender allows for the sale of the property at less than its mortgage loan value. According to the Department of Housing and Urban Development, there were 4,500 mortgagees who submitted pre-foreclosure claims in 2006 nationwide. HUD considers this as modest. Average claims are at $18,346. The advantage of a short sale is that you won't have as bad a credit report as a foreclosure, which stays on your report up to 10 years. Also, houses on short sale are found to be 5% higher in price than those in foreclosure. The disadvantage of a short sale is that the IRS may consider your short sale income taxable.

Below is the short sale process:

1. Contact the Lender. You discuss with the lender your present situation and the possibility of a short sale.

2. Submit Letter of Authorization. You would need to give this letter to give the lender permission to release information about your loan to interested parties. The following should be included in the letter: property address, loan reference number, your name, the date, and your agent's name and contact information.

3. Preliminary Net Sheet. This paper, which can be prepared by your lawyer, Realtor, escrow agent or title company, indicates the proposed selling price, the loan balance, other itemized expenses (including real estate commissions and other fees related to closing the sale). You might not need a short sale if the result has a positive cash flow.

4. Prepare Your Hardship Letter. Here you write down how you've come into your present financial difficulty.

5. Proof of Income and Assets. Together with your hardship letter, the lender will probably want to look at bank statements, investment accounts, pay stubs and other financial records to validate your hardship letter.

6. Comparative Market Analysis (CMA). The lender would want to see the market value of the property as compared to similar properties. Your real estate agent can prepare a CMA for you that would show similar homes that are active on the market, those that are pending sale, and those that have been sold the past six months.

7. Purchase and Listing Agreements. Once you reach an agreement with a prospective buyer, the lender will ask for a copy of the offer as well as the listing agreement. A new set of negotiations might ensue at this point between you and the lender. You may ask the lender at this juncture not to report adverse credit to the credit reporting agencies. The final decision however belongs to the lender. If everything goes well, the short sale pushes through.

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