These are the basic options available. They are in order from best to worst case scenario (as far as your credit is concerned). Depending on where you are in the process and the reasons for falling behind on the payments, you may or may not be able to use the best ones. Just remember that the bank doesn’t make money by owning real estate. They make money by lending it. The bank does not want your house, it costs them too much money for them to take it. They would rather see ANY of the following options prior to foreclosure. See the links page for some more detailed information and government programs that may be able to help.

• Refinance. This is ideal, as you are getting a completely new mortgage, hopefully at a better rate and term. You are paying off your old mortgage in full and are getting a fresh start. If you are early enough in the process, this may still be an option.
• Loan Modification. This is when your mortgage company actually changes the terms of the loan. They could lower the principal due, lower the interest rate, extend the term, waive certain fees,etc. The kicker is you must be able to show that you will be able to afford the new terms without a proble. This is a great option if you had a temporary job loss, a reduction in salary, or some other circumstance that caused you to fall behind, but you are still able to move forward if you could get out from under all those back payments and fees.
• Sell the house and pay off the loan, back payments and fees. There is a time issue here, and the house has to be worth more than the mortgage.
• Deed in lieu of Foreclosure. This is where the bank allows you to sign the house over to them and agrees not to persue any more judgements against you. The bank doesn’t really want your house, though, so it not always feasible.
• Short Sale. This is when an agreement is negotiated with the bank to take an amount lower than what is owed to allow a sale to go through. This can often be done because, again, the bank does not want your house.
• Bankruptcy. The courts can stall the process with a bankruptcy, but the damage to your credit will last, and you may lose the house anyway, compounding the problem.
• Foreclosure. Your house is sold at court ordered auction. The bank can still go after you for any shortfall between what you owe and the proceeds of the sale. Bad for the bank, and bad for you.