First of all, put your emotion aside and channel your energy into finding a solution to your problem. Dwelling on the emotion of the situation only makes it worse while taking action, even if it means finding and moving to a new location, can help you recover mentally from the blow. When you begin to think clearly and take action, you’ll feel much better. Let’s take a look at some of the basic steps you can take and who you can turn to who can assist you in this situation.

If you are having financial problems as serious as foreclosure, my first recommendation is to contact members of your extended family. Of course, this depends on how strong your family bonds are and how good your family relationships are. I understand that not everyone is blessed with a good family situation. But, if your relationship is good, don’t ignore the help you can get from them. Sometimes, they may be able to help you through a financial rough spot if they’re fully aware of the problem. But even if they can’t help financially, they can often help you deal with the problem at an emotional level. Sometimes close friends can substitute for family relationships but I always counsel caution when money is involved although emotional support is fine.

When one is dealing with foreclosure, one of the first places, outside of family and friends, to contact is with the Department of Housing and Urban Development (aka HUD). They can put you in touch with a HUD approved housing counselor. This counselor can give you some ideas you can use to avoid foreclosure. Even if your foreclosure cannot be stopped, these counselors have resources at their disposal that can help you find a new place to live.

You may also find it useful to contact an attorney who specializes in handling foreclosure cases. While bankruptcy is the most common way lawyers stop foreclosure they can have other tools at their disposal, such as determining if your lender has followed legal procedures correctly. Another thing that a good foreclosure attorney can do is provide an emotional buffer between you and the mortgage lender and their representatives. Since your lawyer doesn’t have an emotional stake in the dispute, they can shield you from the troubling emotions that can surround a foreclosure and speaking to lender on the phone or in person about it. The downside of hiring an attorney is the cost. If you’re having financial trouble, then one may not be affordable to you.

Real estate agents who specialize in pre-foreclosure sales and short sales may also be a helpful resource. Having an agent who knows the laws in your state and how to work with lenders on these sales can be a great asset. You do need to be a little wary about who you work with though. Some agents may be lazy in working with you for various reasons and others may push you toward questionable deals. I always recommend checking out the reputation of any real estate agent you work with but especially in the difficult situation.

In some cases, working with your mortgage lender themselves is an option. If your loan is through a smaller, local, bank or loan organization, this is a practical thing to do. They have an incentive to avoid foreclosing on properties in the mortgage portfolio and may be quite willing to work with you. If this is where your home loan is, by all means, contact them as soon as you can. However, if your loan is from a large national banks or if your loan has been sold on the secondary investment market it can be difficult or even impossible to contact anyone with any real decision making authority regarding your loan. At best, you’ll be put in touch with a low level cubical dweller who’s only interest is in following a pre-defined collection script and have no interest in hearing the details of your situation. Don’t put yourself through that kind of useless stress.

I hope this article has provided you with some ideas on who to consult when you’re dealing with a foreclosure.

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However, there is still a way to get a low down payment home loan and that is a Federal Housing Administration (FHA) loan. With a FHA loan you will only need 3% of the total purchase price of the home until January 1, 2010 when this percentage goes up to 3.5%. In most of today’s real estate markets this percentage is doable to potential homeowners who’re able to practice a little financial discipline and save their money with the goal of home ownership in mind.

It is important to note that there are some aspects of FHA loans that a borrower should be aware of before they choose to go the low downpayment route.

First of all, FHA loans will tend to have higher rates than conventional loans. In most markets this difference will run between .5% and .75%. Occasionally you can find incentives from home builders that will pay down this rate difference so be on the lookout for these deals. A good points incentive plan may be able to null out this higher interest rate.

FHA loans require mortgage insurance and the initial insurance premium, that is usually rolled into the loan, is about 1.75% of the total amount of the home loan. On top of that there’s an annual 0.55% premium. This could easily add another $100-200 to your monthly payment so make sure that you take this into consideration when you are planning your budget.

The interest rate FHA loans are also sensitive to the credit score of the borrower, just like conventional loans. Borrowers with a credit score of less than 720 will typically pay a higher interest rate, generally of .5% to 1% higher. Given that conventional home loan lenders generally will increase the rate 2% for borrowers with poor credit scores this helps make FHA loans attractive.

Lastly, you have to consider that when you purchase a house or condo with a low down payment home loan you will start out being ‘upside down’ on your loan. This means that you will owe more than the house is worth. Remember that the costs associated with the sale of a home make up about 5% to 6% of the total purchase price, the amount of the loan. This includes fees for the real estate agent, attorneys, title and taxes. Traditionally, this difference has been absorbed by rising home prices but, given the economic climate of 2009-2010, you probably shouldn’t expect a new home to rise in value for several years.

The important thing to remember about a FHA low down payment home loan is that should you have to sell early your options could be limited to a short sale or foreclosure. With the current economy, you have to make sure that you have enough cash on hand to weather a financial storm like an unexpected job loss. I recommend that a new homeowner have between 3-6 months of mortgage payments in an emergency fund. Don’t purchase a home by using all of your financial reserves, especially if you plan on using a low downpayment home loan plan. You don’t want to put yourself in the position of your new home owning you.

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This act expands on a previous one, Hope for Homeowners, that essentially failed to help distressed homeowners. Because of the many administrative problems and stringent requirements only very few homeowners were about to refinance high-interest rate home loans for a 30-year fixed loan that was backed by the Federal Housing Administration. The previous law was intended to assist around 400,000 American homeowners but failed to do so. This new piece of legislation eases the previously tough eligibility requirements. It also promises to lower the cost of loan modification for both borrowers and lenders. It is hoped that these improvements will help the housing market, weighted down by foreclosures and distressed home sales, recover over the next 2 years

There is still a lot of red tape to deal with when seeking to negotiate a new home loan with a lender, especially when one is behind on payments or significantly ‘underwater’, meaning that the homeowner owes more on a mortgage than the home is currently worth on the housing market. Many people who’re seeking a loan modification due to being stuck with unaffordable house payments have reported considerable backlogs and confusing submission rules. Will the Helping Families Save Their Homes Act improve this situation? It’s too early to tell at this point. One bright point though is the related Making Home Affordable program which has been able help around 50,000 homeowners obtain more affordable terms for their mortgages.

It is hoped that these improvements in home loans will help slow the supply of foreclosed homes since this, in turn, tends to lower prices on everyone’s home. This year may see as many as 2.5 million foreclosures and could potentially negatively impact as many 20% of all US homeowners within the next 2 years if improvements in the market don’t occur quickly. It is hoped that this new program will kick in quickly and reverse this trend.

The bill failed to include a measure that would have allowed bankruptcy judges to modify the terms of a home loan to reduce a homeowner’s monthly payments should they go into bankruptcy. Industry pressure prevented this part of the measure. However, the Helping Families Save Their Homes Act does include a provision to protect renters when their landlord is foreclosed on. Under this new law, renter’s leases must still be honored and, should they be on a month-to-month basis, the law requires that they be given a minimum of 90 days notice. Another key provision of the law is that loan servicing companies are protected from investor lawsuits, aka a “safe harbor”, when they modify loans to prevent foreclosure under the government loan modification guidelines.

If you are seeking a mortgage modification for yourself, make sure that you pick the best option for you. There are scams out there so be careful. Also be aware that some modification programs simply add missed payments to the principle of the loan, ultimately making the home loan less afforable. Some homeowners who have had this kind of modification found themselves once again facing foreclosure when new, higher, house payments kicked in a year or so later. Make sure that you work with a HUD-approved credit counselor in this difficult process.

Another common problem is that loan service companies are swamped with loan modification requests from distressed homeowners seeking help. Many do not have the staff to handle the volume of requests and either don’t answer phones or use cheap outsourced labor from outside the US. Also, since it usually requires several calls to get a loan modification processed, this often means starting over from scratch several times. While this is frustrating, make sure that you are prepared to assist the customer service representative get up to speed quickly on your case. Don’t assume that they have everything they need handy.

If you need help in adjusting your mortgage I encourage you to investigate your options under the Helping Families Save Their Homes Act. It may just help you in your foreclosure prevention efforts.

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