Home 9 Foreclosure 9 12 Options You Have To Save Your Home From Foreclosure

12 Options You Have To Save Your Home From Foreclosure

Jun 1, 2024

Facing foreclosure can be a stressful and overwhelming experience, but you have options to help save your home from foreclosure.

It is important to seek help from a HUD-approved housing counselor when facing mortgage difficulties. These counselors can help assess refinancing options and provide guidance on bringing the loan current.

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This guide provides 12 strategies to avoid foreclosure, including contacting your lender, seeking help from housing counselors, and exploring solutions like mortgage forbearance, loan modification, repayment plans, short sales, and hardship assistance programs.

Understanding Foreclosure

What is foreclosure?

Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments by forcing the sale of the asset used as collateral, typically a property. 

The process varies by state, but generally it involves the lender sending notices, working with the homeowner to catch up on payments, and then initiating legal action to take ownership of the property. 

If the homeowner remains delinquent, the lender can seize the property and sell it at auction to recoup the money owed on the loan. 

Foreclosure can have serious consequences for you, as the borrower, including damage to your credit score, difficulty obtaining future loans, and potential liability for any deficiency between the sale price and the loan balance in some states.

How does the foreclosure process work?

The foreclosure process typically involves several key steps:

  1. Default: The homeowner misses one or more mortgage payments, and the loan goes into default. The lender attempts to contact the homeowner to discuss catching up on payments.
  2. Notice of Default: After 90 days of missed payments, the lender sends a formal notice of default, giving the homeowner 30 days to bring the mortgage current.
  3. Notice of Sale:* If the homeowner fail to pay the amount owed, the lender may proceed with foreclosure and send a notice of sale, stating that the property will be sold at auction within 21 days.
  4. Auction: The property is sold at a public auction to the highest bidder, who must pay the full amount immediately. The lender becomes the owner if no one else bids.
  5. Eviction: If the property is sold, the new owner can initiate eviction proceedings to remove anyone occupying the home.
House made of clay information chart - foreclosure process - learn more

*The exact foreclosure process varies by state, with some requiring court approval (judicial foreclosure) and others allowing lenders to proceed without court intervention (nonjudicial foreclosure).

Falling Behind on Mortgage Payments

I’m having trouble making my mortgage payments. What can I do?

If you’re struggling to make your mortgage payments, the most important thing is to take action quickly to save your home from foreclosure.

Contact your loan servicer as soon as possible to discuss your options. The loan servicer may be able to offer solutions such as a repayment plan to catch up on missed payments over time, a modification to change the terms of your mortgage and reduce payments, or a forbearance to temporarily suspend or reduce payments. 

You can also seek free assistance from HUD-approved housing counseling agencies, which can help you understand your options, create a plan, and work with your mortgage servicer.

Other potential solutions include completing a short sale, where you sell your home for less than the outstanding mortgage balance with the lender’s approval, or a deed-in-lieu of foreclosure, where you voluntarily transfer ownership to the lender in exchange for debt forgiveness. 

The key is to communicate proactively with your mortgage servicer and get expert advice to find the best solution for your situation for foreclosure prevention if possible.

Consequences of missing mortgage payment

Missing mortgage payments can have serious consequences that impact your finances and credit for years. 

When you miss a payment, most lenders offer a 15-day grace period, after which they will charge a late fee, typically 3-6% of the monthly payment amount. 

Your lender will likely report the late payment to credit bureaus once it’s 30 days overdue, causing significant damage to your credit score – it could be up to a 100 point drop or more. This negative mark remains on your credit report for seven years, making it difficult to obtain future loans with favorable terms.

If you continue missing payments, your lender may initiate foreclosure proceedings. After 90 days, the lender will send a demand letter notifying you of the risk of foreclosure. Most lenders can begin the foreclosure process when you are 120 days delinquent, which can result in losing your home. 

A foreclosure severely damages your credit, making it extremely challenging to secure housing or credit for many years. The best course of action is to contact your lender immediately if you’re struggling with payments and find out which options are available for you to help you avoid foreclosure and get back on track.

Communicating with Your Mortgage Lender

Reach out to your lender to discuss options

Contacting your lender as soon as you realize you may have trouble making monthly payments is crucial to save your home from foreclosure. Lenders are often willing to work with borrowers to find solutions and avoid foreclosure, which is an expensive process for all parties involved.

When you call your lender, be prepared with your loan account number and a brief explanation of your financial circumstances. Your lender will likely mail you a “loan workout” package containing information, forms, and instructions that you will need to complete. Complete and return these forms promptly to be considered for assistance.

Lenders have various workout options that may help you keep and save your home from foreclosure, such as:

  • Forbearance: Temporarily suspends or reduces payments, allowing you time to catch up
  • Repayment plan: Spreads the overdue amount over future monthly payments until you’re caught up
  • Loan modification: Changes the loan term of your loan payments to make your monthly payments more affordable
  • Refinancing: Replaces your current mortgage loan with a new one, potentially with better terms

It’s also very important to respond to any mail or phone calls from your lender. Ignoring these communications may lead to the start of foreclosure proceedings, substantially increasing the cost of resolving the issue.

If you have an FHA-insured mortgage loan, you can also contact HUD’s National Servicing Center for assistance in working with your lender for foreclosure prevention.

Remember, the earlier you reach out to your lender, the more options you may have available to address your mortgage issues and prevent foreclosure.

Be honest about your financial situation

When discussing your mortgage payment difficulties with your lender, it’s essential to be honest and transparent about your financial situation. 

Openly communicating the reasons for your financial hardship, such as job loss, reduced income, or unexpected expenses, helps your lender understand your circumstances and work with you to find the most appropriate solution to save your home from foreclosure.

Provide your lender with a clear picture of your current income, expenses, and assets. This information helps them assess your ability to make regular mortgage payment and determine which workout options may be feasible for your situation.

Being forthcoming about your finances shows your lender that you’re willing to work together in good faith to resolve the issue. Avoid downplaying or hiding any of your financial problems, as this can hinder your ability to secure the assistance you need.

Remember, lenders have a vested interest in helping you prevent foreclosure, as it’s a costly process for them as well. 

By being honest and proactive in your communication, you increase the likelihood of finding a mutually beneficial solution that helps you keep your home and get back on track with your monthly payments.

Options to Save Your hOme From Foreclosure

The main key is to act quickly, communicate openly with your mortgage servicer, and seek assistance from trusted resources to find the best solution for your situation and prevent foreclosure.

The sooner you act and communicate with your mortgage lender, the more options you may have to prevent foreclosure. Consult with a housing counselors for free legal services and attorneys to fully understand your rights and choose the best path forward for your situation.

But here are 12 options discussed to help you save your home from foreclosure and keep your home:

Forbearance:Your mortgage servicer may offer a temporary pause or reduction in payments, giving you time to improve your financial situation and catch up on your payments to help you save your home from foreclosure.
Repayment Plan:If you can afford your regular monthly payment but need help catching up on missed payments, your mortgage servicer may allow you to spread the overdue amount over future payments until you’re current.
Loan Modification:Your mortgage servicer may agree to modify your loan term, such as extending the repayment period or reducing the interest rate, to make your monthly payments more affordable.
Refinance:If you have sufficient equity, you may be able to refinance your mortgage to secure a lower interest rate and reduced monthly mortgage payments. Any missed payments would be included in the new loan balance.
Partial Claim (FHA loans):If you have an FHA-insured loan, you may qualify for an interest-free loan to bring your mortgage current, which will include back payments that you missed and you can repay when you pay off your first mortgage or sell the home.
Payment Forgiveness:In rare cases, your servicer may agree to forgive a missed monthly payments if you can resume making regular on-time payments going forward. The payment forgiveness can be a huge help for you to save your home from foreclosure.
Short Sale:If you can’t afford your home, your mortgage servicer may allow you to sell your home with a real estate agent for less than your outstanding mortgage loan balance to avoid foreclosure.
Deed-in-Lieu of Foreclosure:You may be able to voluntarily transfer your property to the mortgage servicer in exchange for canceling your remaining debt. This has a less negative impact on your credit than foreclosure.
Bankruptcy:Filing for Chapter 13 bankruptcy can help you catch up on missed payments over time while protecting your home from foreclosure. Chapter 7 may delay foreclosure to give you time to explore alternatives.
Lawsuit:If you believe your mortgage servicer has violated the law or made errors in the foreclosure process, filing a lawsuit could potentially delay or stop the foreclosure, though this can be costly.
Catching up on Mortgage Payment:If you suffer a short-term financial setback, your lender might provide some breathing room by agreeing to let you pay off your missed payment in two installments over the next two months. This could give you time to get back on track with your loan payments.
Housing Counseling:Contacting a HUD-approved housing counseling agency can help you understand your options, create a plan, and work with your servicer to avoid foreclosure.

Understanding the Tax Consequences of Foreclosure

Foreclosures can have significant tax implications that are important to understand. 

When a lender forecloses on a property, it is treated as a sale for tax purposes. If the outstanding mortgage balance exceeds the property’s fair market value, the difference may be considered cancellation of debt (COD) income, which is generally taxable as ordinary income.

However, taxpayers may be able to exclude some or all of the COD income under certain provisions, such as insolvency or bankruptcy.

House in the background with a foreclosure sign tilted - What are the tax consequences of foreclosure - Learn more

Additionally, any gain from the foreclosure sale, calculated as the difference between the fair market value and the adjusted tax basis, may be subject to capital gains tax, although exclusions may apply for a principal residence.

The specific tax consequences depend on factors such as the type of debt (recourse or nonrecourse), the taxpayer’s adjusted basis, and their financial condition at the time of foreclosure. 

Consulting with a tax professional is crucial to understand the full tax implications of a foreclosure and explore potential strategies to minimize the tax burden.

How can I save my home from foreclosure

The key is to communicate proactively with your lender as soon as you are having trouble making payments. Ignoring the problem will only make it worse. Seek assistance from HUD-approved housing counselors who can help you explore your options and work with your lender to find a solution to keep you in your home if possible.

Here is a brief overview of ways to potentially save your home from foreclosure:


Pay the total amount you are behind on your mortgage in a lump sum by a specific date to bring your loan current.

Repayment Plan

Spread out the past-due amount over a set time period by adding a portion to your regular mortgage payments until caught up.

Loan Modification

Work with your lender to modify the terms of your loan, such as extending the term, lowering the interest rate, or reducing principal, to make payments more affordable.


Temporarily suspend or reduce your mortgage payments for a set period to provide short-term relief, with the option to make up the missed amounts later.


Filing Chapter 13 bankruptcy allows you to pay off the past-due balance through a court-approved repayment plan over 3-5 years while preventing foreclosure as long as you keep up with payments.

Alternative Solutions if You Can’t Afford to Stay In Your Home

If you’re unable to remain in your home, your mortgage servicer may consider these alternatives to foreclosure:

Short Sale

Your mortgage servicer might agree to sell the home on a short sale for less than the outstanding loan balance. This allows you to avoid foreclosure while the lender recoups some of the money owed. This process will require you to obtain a real estate agent to help you sell your home.

Deed-in-Lieu of Foreclosure

With this option, you voluntarily transfer the property back to the servicer in exchange for debt forgiveness. A deed-in-lieu has a less negative impact on your credit score compared to foreclosure and may include relocation assistance.

toy house on top of deed document

The deed-in-lieu of foreclosure involves willingly giving your property to the lender in return for pardoning your remaining debt. This option is available if you cannot sell your home before foreclosure.


Filing for bankruptcy can provide relief from foreclosure, but the extent of protection depends on the type of bankruptcy filed.

Chapter 7 – Can temporarily delay foreclosure proceedings by imposing an automatic stay, which stops collection activities, including foreclosure sales. This can provide a few months of relief to allow time to explore alternatives or negotiate with the lender. However, Chapter 7 does not eliminate mortgage arrears or allow you to keep your home long-term unless you can bring the loan current.

Chapter 13 – Offers more comprehensive protection against foreclosure. It allows you to catch up on missed mortgage payments over a three to five-year repayment plan while also preventing the lender from foreclosing during this time, as long as you make all required payments under the plan. Chapter 13 may also enable you to strip off junior mortgages, like second or third mortgages, if they are wholly unsecured due to a drop in your home’s value. It’s important to note that filing for bankruptcy multiple times in a short period can limit the automatic stay’s protection against foreclosure. 

Additionally, bankruptcy will negatively impact your credit score, although it may be less severe than a completed foreclosure. Consulting with a bankruptcy attorney can help you understand the bankruptcy court process, the implications of filing for bankruptcy and determine if it’s the best option for foreclosure prevention in your specific situation.

frequently asked questions (faqs)

How long does a foreclosure take?

A foreclosure can be completed in a few months if the homeowner doesn’t have a strong defense, but the process may take a year or longer if the case is more complex. The timeline restarts if the court dismisses the foreclosure and the lender pursues it again.

Who pays the costs of a foreclosure?

The homeowner is responsible for foreclosure costs if they pay off the loan. If the property is sold, the buyer covers the costs. If the lender buys the property at auction, they will try to recoup the foreclosure expenses when reselling it.

How does a foreclosure affect your credit?

A foreclosure can severely damage your credit, making it difficult to obtain loans or rent housing in the future. It will decrease your credit score and remain on your credit report for 7-10 years.

How can an attorney help with foreclosure?

An attorney can analyze your situation, help negotiate with your lender, ensure the lender follows all legal requirements, and represent you in court or mediation to help achieve the best possible outcome. Hiring an attorney early in the process provides the most options.

Shouldn’t I try to keep my home at all costs?

No! As hard as it is to hear this answer keeping your home may not be best option for you and your family financially. Before making the decision to try to keep your home you will need to assess your personal finances and make sure this home will not become a burden for you again in the future.

Final thoughts

Facing foreclosure can be overwhelming, but you have several potential options to avoid losing your homes. These options includes contacting your lender to discuss solutions like forbearance, repayment plans, or loan modifications.

 You can also explore government assistance programs, work with HUD-approved housing counselors, or consider filing for bankruptcy to stop foreclosure and catch up on payments over time. If staying in your home isn’t feasible, your lender may agree to a short sale or deed in lieu of foreclosure to help you exit gracefully and minimize the damage to your credit.

 The most important thing is to act quickly, communicate openly with your lender, and seek expert advice to understand your options and make the best choice for your unique situation. With the right strategy and support, it may be possible to save your home from foreclosure and regain stable financial footing.

The Budget Academy
Fab Kellum author of the Girl, Get Out of Debt! blog

Hey you! Welcome to The Budget Academy. I am Fab, a mom, and an entrepreneur at heart. Like many, I have overcome financial struggles, and now I get to share with you how I became debt-free and what I learned on my own personal journey.  I have a Finance and Real Estate background and am passionate about helping others succeed and achieve financial freedom.  So, please don’t be shy, let’s connect and start this journey together! Learn more about me here.