How to Hang On to Your Foreclosed Home

The second type of delinquent borrower has less hope, Jordan says. These are the people who bought houses they couldn't afford without realizing the interest rate would skyrocket, or who relied on refinancing in order to afford mortgage payments. Those borrowers will likely have to forfeit the home but should be strategic about their exit, Jordan says.

Lenders sometimes leave property in a pre-foreclosure state to avoid putting more foreclosures on their books during the quarter, he adds. If afforded the option, borrowers should stay in the home as long as they can, while saving up to move out.

"They should take whatever they squeeze together for the mortgage payment and put into cash reserves," Jordan says. "Stay in the house until they're basically forced legally to move. Once you're past 90 days, it doesn't really matter how long the process drags out."

Still, borrowers must balance the risk that such a strategy could have a negative effect on their credit. For those who simply can't afford it, selling the property or turning it over to the lender are better options than foreclosure.

Time Is of the Essence

The earlier one prioritizes debts and gets in touch with the mortgage lender, the sooner and more favorably the situation can be resolved.

The Federal Housing Administration's Web site offers guidelines for those at risk of foreclosure. It also has a database of free or low-cost housing counselors for those who are intimidated or uncomfortable about working out a deal with their lenders alone.

But beware of shady offers for "pre-approved" credit, the FHA warns. Many of those deals are simply scams or come from predatory lenders who increase your debt and charge excessive fees. If a deal sounds too good to be true, it probably is.

>To order reprints of this article, click here: Reprints