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Act early to prevent foreclosure

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Keep the wolf away from the door.

As people struggle to make rising mortgage payments, and the number of homes nationally entering foreclosure breaks records, homeowners are plagued by the vision that they will be thrown out of their homes.

The threat could become real if you are procrastinating, hoping for the best and ignoring monthly payments you cannot afford.

But you might be able to hold onto your home if you take the threat seriously and go into action now.

"The biggest mistake people make is waiting until it's too late," said Paul Bach, a Northbrook bankruptcy attorney.

When a person gets far behind in making mortgage payments, options dwindle. And if they are within days of losing their home -- or the point when Bach says frantic people tend to show up for the first time at the attorney's door -- a painless escape is difficult.

Instead, explore the following:

- Can you refinance?

If you have good credit, are not behind on mortgage payments, and know that your monthly payments are adjusting to a level you cannot afford, try to obtain a new mortgage.

It's probably not going to be as easy as in the past. The housing mess has caused lenders to go out of business, and remaining lenders have tightened qualifications for obtaining loans. That's one reason why it's critical to act while your credit history is in good shape.

If you are doing OK, and the clock is ticking toward monthly payments you aren't going to be able to handle, be careful not to be sidetracked by a broker who will not deliver what you need, said Gerri Detwiller, author of the "Ultimate Credit Handbook" and analyst for Credit.com.

Some mortgage brokers will drag out the loan process, suggesting that you will be receiving a loan, and then telling you days or weeks later that they cannot find a lender to grant one at an attractive rate.

Go to a bank or credit union that lends directly to individuals. Be suspect if a broker merely pulls your credit report. Instead, a serious one will be verifying your income, pulling tax forms and getting an appraisal of your home.

To make sure the deal is solid, request a lock on the loan in writing from the lender. Be aware that the recent housing mess has been tough on lenders, and even large lenders have gone out of business. So close on the loan as quickly as possible, Detwiller said.

- Seek help from your lender.

If you can't refinance to easier terms, turn to your existing lender for some relief.

You probably won't be going to the lender directly, however. Rather, you will talk to a servicer, which is the company that sends you your mortgage bills and collects your payments.

This can make the negotiations somewhat complicated. If the servicer hasn't been given the leeway by your lender to give you a break, you could have trouble.

But lenders often would rather avoid the costs associated with taking back a person's home and putting it up for sale.

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