by Sue A. Sponte

Created on: January 29, 2007   Last Updated: April 13, 2007

Stop! Before you go any further, ask yourself the single most important question: why is your home in (or near) foreclosure? You cannot possibly make a reasonable plan to get out from the danger of foreclosure until you know how you got there to begin with. There are two main reasons why you might be facing this problem. You either have an income problem or you have an expense problem.

Income Problems. Simply put, you have an income problem if you are longer making enough money to pay your bills, including your home loan. This has traditionally been the reason why most people faced foreclosure. The source of your income problem might be related to job troubles. For example, getting laid off is frequently the beginning of a long road to financial ruin and the final stop is frequently foreclosure. But there are other variations on the income problem: some people find themselves in an income problem when they undergo a divorce. Self-employed business owners can see an economic downturn that slows sales.

Expense problems. There are increasing numbers of people facing foreclosure even though their income has remained the same or even increased. These people are often facing an expense problem: their home loan payments and all other bills have increased to the point where that same income does not cover all the costs. For the last few years, banks have been irresponsibly writing loans that offered very attractive 'teaser' rates that lured people into buying houses (or refinancing existing loans) in order to get a small payment. But that teaser rate has to be followed by higher rates and payments later. Now, "the chickens are coming home to roost." People are finding their home payments rising by hundreds of dollars.

There is a subset of the expense problem that is completely unrelated to your home loan: the easy availability of other types of credit has allowed people to bite off more than they can chew. As credit card balances and interest rates pile up, the home loan becomes one of many bills that we just can't pay. People in this condition are facing not only foreclosure but also bankruptcy. It is the same if you now face unexpected medical bills that are taking up what used to be your mortgage payment.

Knowing which of these categories you are in makes a huge difference in how you save yourself from foreclosure.

Income problem: you have to do one of two things. First take an immediate and honest look at how likely it is that you will be able to get back to your previous

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