Your home is one of the largest expenses you have every month. This in turn means that when times get tight, such as during a recession, it can be one the hardest financial obligations to meet. If your home value drops, and you owe more on it than it is worth, or if you lose your job, or have unexpected expenses and get under water on your mortgage, you will be in danger of losing your home to foreclosure. Besides financial difficulty, one of the biggest problems borrowers face when their home loan is under water is that they are embarrassed to admit it and seek help. However, the fact is that if you are having trouble meeting your mortgage obligation, there are a few things you can do so that you do not lose your home. However, no matter what option you pursue, the first thing you have to do, and cannot get around, is talking to your lender about your money problems.

What does it mean to be under water on your mortgage? Under water mortgage is defined as owing more on your mortgage balance than the value of your home, or getting behind on your mortgage payments. Both are bad news for the borrower and the lender. This problem most often occurs when a bank was too liberal with a loan and loaned more than the borrower could really afford, or when people took out equity loans on their homes for more than they are currently worth. Recessions can cause this to happen, but good financial planning can prevent it.

If you do get underwater on your mortgage you need to talk to your lender. You can talk to your lender one of two ways. You can respond to them after they call or send you a letter about being behind on your mortgage; or, you can call or write to them first. This means that if you get behind, and know you can't make your monthly mortgage payment, instead of waiting for the lender to contact you and ask why, you can contact them and give them a heads up on the situation. The second is the better option because it shows the lender that you do not want to lose your home to foreclosure, and that you are willing to work with them to find a solution.

If you do not contact your lender, and you get behind on your mortgage, the first thing a lender will do is send letters or make a phone call to you about being behind. They usually do this as a courtesy to ensure that your payment is not in transit, or that it did not get lost in the mail, etc. However, if you fail to respond to their attempt to contact you they will then be forced to start the process of foreclosure.

So, to keep your home, even if you get a little behind on your mortgage, contact your lender first thing, even if you think you might be able to find a way to work things out. The lender is going to want to help you because they too lose money if you foreclose on your home. In many cases they are forced to sell the home for below value so that they do not have carrying costs. They lose the potential interest you would have paid on the loan, and they lose time. This all translates into motivation for them to help you come up with a solution to get out from under the water, and back on top of your mortgage payments.

A lender is going to be far more willing to work with you if you take the first step, have a good payment history, and if you have a legitimate reason for why you got behind on your mortgage. For example, if you lose your job they are going to be more willing to work with you then if you bought a boat and can't afford both payments.

When contacting your lender make sure you are talking to their loan department, not a collection agent, as they are not going to be able to help you. If you are worried about not talking to the right person, you can use the help of a homeownership counseling agency. These agencies are set up to help borrowers who get behind on their mortgage negotiate lower interest rates and affordable monthly payments so homes are not lost to foreclosure.

Foreclosing on a home is expensive for a lender, so they may be willing to restructure your mortgage, offer you an extension to make your payment, help you work out payment plans, or help you to sell the house before you foreclose (short sale) so that you both get out of the situation a little better off. The option they offer will depend on the situation you are in, and your willingness to comply to the new terms they offer.

If you are serious about saving your home, and getting back on top of your mortgage it is imperative that you review your financial situation and provide your lender with a date by which you can get back on your feet. This may be set by the lender, but you can help them to find a date that you can realistically meet your financial obligation. For example, if you lose your employment and that is why you get behind, and then you start a new job, you may need a month extension to wait for your first paycheck, etc. to make the payment up. Your lender will likely be willing to restructure your mortgage in order to make it possible for you to get your head back above water. They do not want your house, they are not in the real estate business, they want your payments, and they will work with you if that means they will get them.

One option your lender may offer is that of partial reinstatement. In this case you are going to need to start making your monthly payments in full again. Then they will allow you to make up the missed payments in smaller chunks, or with a balloon payment due at a specific date. Generally the way they will set it up is they will borrow the money you need to make up the missed payments from HUD, and then you will get to pay it back plus interest over a set period of time. This is a likely option if you lose a job and do not make payments during the period where you looked for a new one. If you then get a new job, and can afford your monthly payment once again, then they will work with you to make up the missed payments.

A great option for someone who only has a temporary financial setback is that of forbearance. This is an option where you are allowed to take a break from your monthly mortgage payment before you have to start paying again. This is an option that may be offered if you get injured and have to take time off work to recover, or if you lose a job and are looking for a new one. When you are given this option it may be a short term forbearance of one or two months, or it may be long term, where payments are suspended for 4-12 months. This does not mean you are exempt from paying the amount owed during the forbearance it just means you will be given an extension to pay it. You may be required to make it up in installments, or in one lump sum. You can work with your lender to determine which option will work best for you.

Another option lenders may offer to you is that of loan modification. Loan modification allows lenders to cut the interest rate or increase the payment period so the monthly payment amount goes down, making the mortgage more affordable to you, the borrower. They are only going to be willing to do this if you have a good payment history. When the modify your loan they may add late payments and missed payments the total balance so that you do not have to pay extra to make them up, but pay longer, and more interest in the long run. When you are underwater on your mortgage this is a good option to look at because it can reduce your payments by hundreds of dollars, and it is a permanent change (like a refinance), which means it is not a temporary solution. If you do get back into a better financial position you may want to review your mortgage and determine if there is a better option for you.

If you are too far behind on your mortgage to ever make it up, or if you owe far more on your home than it is worth, your lender may help you to do one of the following: Selling your home, transferring title, etc. Most lenders are not fond of this option and will not offer it, but it is a way to help you get less of a hit on your credit, and help lenders lose less.

A short sale allows the lender to approve the sale of a property in order to help the borrower avoid loss. When you choose this option, the lender will send a loss mitigation specialist to your home to estimate the value and whether or not it is worth the amount owed. Then another party steps in and buys the home, to pay back the bank for a short loss. A short sale sometimes means the borrower keeps the property. The specifics will depend on your specific situation.

If your home is just not worth enough, and you can't sell it to make up the difference of what you owe, then typically foreclosure is the best or only option. Banks hate doing it, it hurts the lender and the borrower, but it is one of the only ways to make things right. Basically you lose your home, and the bank then sells it at auction, or for a reduced rate to make up at least some of the funds owed.

The best thing you can do to avoid this situation is to buy a home you can afford, and not live outside your means. In addition to that, save money so that should you lose a job, or have unexpected expenses you can still meet your financial obligation.