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5 Strategies to Avoid Foreclosure

Katie DuncanOctober 15, 2021

Reviewed By: Amplify

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When you aren’t able to pay your credit card bill, you can expect to face late fees, high interest charges, and damage to your credit score.

When you are unable to make mortgage payments, the story is a little different. On top of facing some of the consequences listed above, you also risk foreclosure. Foreclosure is the legal process in which a lender seizes and sells property when a borrower is unable to make payments on their loan— and it’s not a good position to be in. Losing your home can be devastating for you and your family, and the long-term financial consequences that follow can be overwhelming.

For those who feel that they are at risk of foreclosure, know that you have options. If you find yourself unable to make payments, the time to act is now. There are a lot of ways to avoid foreclosure, especially if you act quickly.

How to Avoid Foreclosure

Take action and explore these five strategies to avoid losing your home.

1. Communicate with your lender.

Perhaps the most important thing that you can do to avoid foreclosure is to communicate with your lender. Don’t wait for your bank to contact you; be proactive and let them know as soon as you begin having trouble making payments. Reaching out early will give you plenty of time to find a solution. If you put it off, there may be no time left to save your home.

Your lender will likely provide you with a number of options to avoid foreclosure. Your loss mitigation solutions may include:

  • Loan repayment plan: If you are facing a temporary setback, your lender may work with you to come up with a plan to make up your missed payments.
  • Loan modification: Loan modification changes the terms of your loan. Most often, this involves changing the length of the loan or rolling the delinquent amount back into your mortgage so you can begin making payments with a clean slate.
  • Selling your home: If the property is worth more than the mortgage, you may be able to sell your home instead of losing it.
  • Short sale: If your property is worth less than the mortgage owed, your lender may agree to let you sell the house for less than what you owe. With a short sale, you’ll then repay the loan with the money from the sale and the lender will forgive the remaining balance.
  • Deed-in-lieu of foreclosure: With a deed-in-lieu of foreclosure, you will give the lender the deed to your home in order to avoid foreclosure. The bank will still gain ownership of your home, but you avoid foreclosure proceedings and the financial consequences that follow.

Know that a lender won’t automatically default to one of these options if you fail to make payments. These options are only available to those who work with the lender to find a solution.

Why Avoid Foreclosure?

In some of the options we discussed above, borrowers will still end up giving up their home. This may leave you wondering, “Why go through the trouble of avoiding foreclosure if you lose the house anyway?”

It’s important to remember that foreclosure has lasting consequences beyond losing your home. A foreclosure is one of the worst marks you can have on your credit report. It will harm your credit score and make it difficult to qualify for any type of credit for the next seven years. On top of that, foreclosure doesn’t always completely get rid of your mortgage. You may still end up owing the bank after foreclosure.

So even if you lose your home, you can lessen the impact of these other financial consequences by avoiding foreclosure altogether.

2. Reevaluate your budget and expenses.

If you haven’t done so already, take time to reevaluate your expenses and ensure that there is nothing that you can cut out of your budget to save money for the upcoming months. This can be a viable solution if you are facing a situation that has temporarily thrown off your finances like a job loss or medical emergency.

In some cases, cutting out unnecessary expenses and operating on a barebones budget can put the money back in your pocket that you need to cover your mortgage payments for several months. Prioritize other financial goals, such as paying down debt, after making your mortgage payment.

3. Research state and local programs that you may qualify for.

Similarly, your state or local government may offer loss mitigation programs for qualifying residents. Check with your local Department of Housing for more information about solutions that may help you.

4. Explore federal programs available to you.

There are several federal programs designed to help homeowners who are struggling with mortgage payments or are at risk of foreclosure. For instance, the Making Home Affordable Program provides resources and can assist homeowners in getting better loan terms and lower interest rates. The Fair Housing Administration also offers several loss mitigation services through the National Servicing Center for those with FHA home loans.

5. Refinance your home.

In some cases, refinancing your home can make it easier to make payments. For instance, if the payments of a 15-year mortgage are placing a strain on your finances, refinancing into a 30-year mortgage can lessen your monthly payment.

Keep in mind that missed mortgage payments or foreclosure proceedings can hurt your credit score, making it difficult to qualify for a refinance. Loss of income can also make this option more difficult to accomplish.

Foreclosure Do’s and Don’ts

When defaulting on your mortgage and facing foreclosure, remember the following dos and don’ts.


  • Understand the terms of your loan. Make sure you understand everything you agreed to when you closed on your mortgage.
  • Record any interactions or communication with your lender. Anytime you speak to your lender, keep detailed records and notes, including who you spoke to, when, and what was discussed.
  • Do your research. It always helps to have a basic understanding of how foreclosure proceedings work in your state. If something doesn’t seem quite right or legal with your foreclosure process, do your research or consult a real estate attorney to get more information.


  • Wait until the last minute to take action. If you wait until it’s time to pack your bags and leave your home, it’s too late. Contact your lender as soon as you begin to have trouble making payments.
  • Ignore communication from your lender or the court. Answer all phone calls or mail correspondence from your lender. Ignoring the issues will not make them go away; they will proceed with or without your acknowledgment. In Texas, a lender is only required to send you two notices before a foreclosure sale.
  • Pay upfront for foreclosure prevention services. Foreclosure rescue services are common scams that prey upon people in a vulnerable situation. These services will ask for money upfront with the promise that they can stop proceedings. Oftentimes, people end up losing their home anyways and never again see a cent of the money they paid.
  • Make payments to someone other than your lender. Similarly, don’t make payments to someone other than your loan servicer— even if they say that they will work out a deal and pay the servicer.

Working to Keep Your Home

If you are struggling to make payments, remember that foreclosure is not the only way out. As a borrower, it’s time to get help from outside resources or to work with your lender to come up with a plan to keep your home.

Making Home Affordable

Official Program of the U.S. Department of the Treasury & the U.S. Department of Housing and Urban Development

Katie Duncan

Katie Duncan is a financial writer based in Austin, Texas. Her articles include financial advice for freelancers, homebuyers, and more. When she’s not writing, Katie loves traveling and exploring the outdoors with her friends and her dog, Poe.