These days the news is full of stories of distressed homeowners landing in foreclosure. Mortgage borrowers can face foreclosure for a variety of reasons — CNNMoney recently wrote about a family who ended up in foreclosure because their title company went under and interrupted their refinance proceedings — but it’s a process you typically want to avoid no matter the cause.

While the foreclosure process differs from state to state, there are some general guidelines to know about foreclosure. Knowing these can help if you find yourself slipping behind on your mortgage.

The cost of missed payments

It usually takes about three to six months of missed mortgage loan payments to get the foreclosure process started. Late fees for a missed payment are likely to kick in after 10-15 days, and once you go 30 days without a payment, you will be considered in default on your home loan.

While you may be inclined to avoid your mortgage lender in the event of late or nonexistent payments, that’s not a wise approach. Contacting your mortgage lender as soon as you begin having financial problems can give you more options for help than if you wait. Avoiding your lender and falling further behind on payments is actually likely to speed up the foreclosure process and deepen your troubles.

Types of foreclosures

If you find yourself in the unfortunate situation of defaulting on your mortgage, there are three types of foreclosures you might suffer.

The first is a judicial foreclosure, which involves the mortgage lender filing suit with the judicial system. In these cases, you would receive a note in the mail demanding payment and have 30 days to respond. If you don’t make a payment in specified time frame, the property can then be auctioned to the highest bidder by a local court or sheriff’s office.

Similarly, a power of sale foreclosure can occur if you’ve defaulted on a home loan and have not responded to demands for payment over a specific period of time. But in this case, the mortgage company can carry out an auction of the property rather than having the sheriff ’s office or local courts do it, which is what distinguishes it from a judicial foreclosure.

The last type is strict foreclosure, which is not allowed in all states. In this type of foreclosure, when you default on a mortgage loan, the lender files a lawsuit against you. Then if you don’t make payments within a time specified by the court, the mortgage lender can take ownership of the property. This type of foreclosure is most commonly associated with homes where the loan amount is higher than the value of the property.

While foreclosures can come in different types, the end result of all is still likely to be unpleasant. The best defense against foreclosure, outside of staying out of default in the first place, is working closely with your lender to manage any difficulties you encounter in making your payments.

How old is too old to refinance? A recent Reuters article weighed in on the wisdom of Federal Reserve Chairman Ben Bernanke refinancing his mortgage loan at the age of 57, just two years after his last refinance. With interest rates near historic lows, some baby boomers may be thinking about refinancing their mortgage loans to improve their financial situation. Here are some things to consider before applying for a refinance when you are near — or even past — retirement age.

1. How many years do you have left on your current mortgage? Each time you refinance you are setting back the clock on your mortgage loan amortization schedule. Starting over with a new loan means that most of your monthly payments will go toward interest payments during the early years of the loan. So decide whether it is worth it to refinance your current loan and stretch out the payment for a longer period of time.
2. Can you refinance into a shorter term? Refinancing into a 15-year term could make sense if you have already paid down a lot of principal on your current home loan. Depending upon how much principal you owe, your monthly payments could actually increase with a 15-year mortgage.
3. Are you still working? Being employed with a healthy income can improve your chance of getting approved for refinancing. Mortgage lenders are scrutinizing financial information of potential borrowers to determine if they are a good risk. Your credit score and other information such as savings and assets will factor into whether you get approved for a loan. If you have already retired, it will likely to tough to get approved for refinancing, but you may qualify for reverse mortgage. Reverse loans allow people aged 62 and up to convert some of their home equity to cash.

Refinancing a mortgage loan can work for some older people. But take time to compare several mortgage quotes to get all the information you need about doing a refinance so you don’t end up struggling to make monthly payments well into your golden years.

Getting rejected for a home loan doesn’t mean you can’t reapply and get approved later. But before filling out another mortgage application, here are some things you may want to consider doing first.

Clean up your credit

Mortgage lenders have money to lend if you are viewed as a good credit risk. A credit score of 720 or higher will be viewed positively if you apply for a home mortgage. However, even a good credit score won’t save your application if you are underwater your current home loan or have too much debt.

Getting rid of as much debt as possible can help your loan application. That doesn’t mean shifting debt around from one credit card to another or transferring all of it to a debt consolidation loan. You need to actually decrease the outstanding balance owed to creditors for it to really impact your credit score. If you need help putting together a debt reduction plan, look for a reputable credit counselor that can help.

Save more money

Whether you are look to refinance a home loan or get a new mortgage to buy a place, the more cash you have at closing the better. Having a large down payment when purchasing can help you avoid mortgage insurance payments if your equity is going to be 20 percent or higher. If you don’t have enough equity to refinance to take advantage of today’s low interest rates, you may be able to get approved for a loan by bringing cash to the closing.

Get help with a home loan

If all else fails with trying to get a loan on your own, consider asking a parent or other relative for help. You may have a better chance of getting approved for a mortgage if you have a co-signer with a strong credit history. A co-signer is someone who agrees to be responsible for the mortgage loan if you aren’t able to pay it back. Even if your relative isn’t willing to co-sign, he or she may be willing to contribute money toward the down payment.

Home builders grew more confident in November, compared with October’s figures. Confidence in the market for single family homes rose by three points to 20, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index was at its highest level since May 2010.

Housing market faces challenges

Bob Nielsen, chairman of the National Association of Home Builders, said in a statement:

While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to many challenges that home building continues to face with regard to the high number of foreclosures, the difficulty of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers. These problems must be addressed so that housing can contribute to economic and job growth the way it has in the past.

Qualifying for low-rate mortgage loans

The increase in builder confidence is related to the fact that homeowners who are able to qualify for mortgages are looking to take advantage of current mortgage rates, which have dipped to historically low levels. Borrowers with good credit may be more willing to hunt for a new home at a bargain price if they can obtain a mortgage loan at such low rates. The NAHB anticipates that builder confidence will continue to improve going into 2012.

Help for the housing market

The state of the nation’s housing market continues to be of concern to many people inside and outside the real estate industry. Speakers at the 2011 Realtors Conference & Expo said that the struggling housing market needs to be a priority of the nation’s public agenda.

“A healthy housing industry helps everyone in the country,” said Rep. Gary Miller, (R-Calif.) at the conference. The housing market has led this nation out of every downturn we’ve had in the past. Congress needs to focus on stabilizing the market, and that must be dealt with today and in a comprehensive fashion that will serve homeowners today and in the future.”

Despite woes in the housing market over the last five years, many Americans still believe in the dream of home ownership. A recent poll by the Pew Research Center found that 81 percent of adults agree that buying a home is the best long-term investment a person can make. That’s despite the fact that home prices have dropped 31 percent from 2006 peaks. Home ownership beat out having enough money to live comfortably in retirement, being able to pay for children’s education and being able to leave an inheritance for children.

About half of those polled (47 percent) said their home is worth less than it was before the recession started, while 31 percent said their home’s value has remained the same and 17 percent said the value has risen. Of the people who said their home had lost value, 37 percent strongly agree and 45 percent somewhat agree that buying a home is their best long-term investment.

When to get a mortgage

Many of these people may be waiting until home prices rise so they can try to sell and get a mortgage to purchase a different property. Renters also believe in home ownership, with 81 percent saying they would like to buy a place. While home prices may not have reached the bottom yet, that doesn’t mean it doesn’t make sense to get a mortgage at this time. It’s just important to do your research to get the best home loan deal possible.

Comparing mortgage loans

Avoid letting your emotions get the better of you when shopping for a home loan. Mortgage rates have been inching up recently and there is an expectation that they will continue rising this year, according to a Sacramento Bee report. But current mortgage rates are still affordable for people who have the means and credit to buy a home.

If you aren’t in the market for a new mortgage and can afford your current payments on a home loan, it probably makes sense to stay put. Also, if you have bad credit you will have a difficult time getting a mortgage lender to approve you for a home loan. Keep working on repairing your credit and saving up a down payment until you are in a position to buy into the American dream of home ownership.

Advertisements promising mortgages for those with bad credit are a dime a dozen. But often, the claims are exaggerated and mortgage loan applicants are turned down because they are seen as too big of a risk. When people are approved for a loan even though they don’t have great credit, they end up paying more because of high interest rates. You may be determined to not let having bad credit keep you from getting a mortgage, but should you really get a loan?

Not-so-ancient history

The reason mortgage lenders review your credit history is to determine what kind of consumer you are. Having bad credit is a sign that something in your past and present has kept you from being financially responsible. Maybe you fell on hard times after a job layoff, divorce or major illness in your family. However you got to where you are, money has been handled in a way that indicates that lending money to you at this time might be a mistake.

Questions for you

Getting a home loan is a major financial decision that can really backfire if not handled properly. Ask yourself the following questions before applying for a mortgage:

1. Are you really ready to take on the payments for the mortgage loan, taxes and insurance? Tax payments are set by your town based upon a property assessment, but mortgage and insurance payments will be affected by your credit score.
2. Why can’t you wait to buy a home? Are you currently living in a rental and having difficulty keeping up with the monthly payments? Getting a mortgage loan isn’t going to improve that dilemma in most cases. Remember, owning a house means you’ll be responsible for repairs, upgrades, yard work and anything else that comes up.
3. Why should mortgage lenders trust you to repay a loan? Be honest about your financial behavior up to this point. Have you been dishonest with others and yourself when dealing with bill collectors and creditors? Are you constantly making excuses for why you’re late with payments? Do you tell your kids or other family members to lie to bill collectors when they call? These are signs that you probably are not ready to get a home.

Repair credit before mortgage application

The bottom line is that going through the steps to repair credit can prepare you for getting a mortgage loan down the line. If you need help doing this, find a reputable debt counseling agency in your community.

Many Americans have slashed their spending and are doing without in order to pay off debt and lessen the effects of the troubled economy. Paying off mortgage loans early has become more popular, something that many financial experts have traditionally advised against.

Getting free of a mortgage

The argument for accelerating payments on a home mortgage is that you build equity faster and ultimately will own it free and clear of any debt obligation. You will always have the security of knowing that the place is yours as long as you want it to be. Paying off a home mortgage in full also would likely free up a significant chunk of your income, allowing you to have more control and freedom to use it for other purposes.

Using income for other investments

Those who are against accelerating mortgage payments often cite the loss of the mortgage interest tax deduction. They also point out that instead of putting extra cash toward a home loan, the money could be invested in mutual funds or other investments that may earn you more money. Also, during the years when you are accelerating mortgage payments, you may have less income to put toward other things.

Biweekly mortgage payments

Before you starting attacking your mortgage debt for a faster payoff, learn as much as you can about the various methods. Biweekly mortgage loan payments can allow you to pay off a 30-year mortgage about six years ahead of schedule. Instead of making mortgage payments once a month like a lot of borrowers do, you make a payment every two weeks. So instead of making 12 payments a year it works out to 13 payments.

Most mortgage lenders allow biweekly payments, but usually charge a fee to set it up. Skip the fee and set up your own biweekly mortgage payment plan. Check with your mortgage lender to see if you can send half of the payment every two weeks. If the lender won’t allow it, divide the monthly payment by 12 and add that amount to the payment on the principal each month.

Use cash windfalls

Use bonuses and other cash windfalls to pay down mortgage debt. Make sure you don’t need the money for other expenses that are more pressing than paying off a mortgage. For instance, putting lump sums of cash toward credit card debt can wipe out high interest payments, which would give you a better return on your money than paying off low interest mortgage debt.

Having enough money to purchase a home outright might seem like a fantasy, but 28 percent of all homes bought in 2010 were all-cash deals, according to a recent Wall Street Journal article. Areas that had more depressed housing markets had more all-cash purchases.

Among the areas that saw a lot of these purchases is Miami-Fort Lauderdale, were over 50 percent of purchases involved cash buyers. About 42 percent of real estate purchases in Phoenix were all-cash deals.

“The prices were just irresistible,” Richard Stoker, who paid cash for two condos in Miami Beach, Fla., told the Wall Street Journal. “Florida’s been hit pretty hard.”

No mortgage loans

Buyers who pay with cash may receive a discount off the price of a home.They also have the freedom that comes with owning a property free and clear of a mortgage. Often people who are able to purchase a house with cash are investors. According to San Diego-based DataQuick, “All-cash deals have become popular in many Western markets where prices have dropped sharply, luring investor buyers who don’t always qualify for traditional mortgages. Moreover, sellers favor the relative speed and certainty of all-cash transactions.”

While investors are more likely to do all-cash deal, that doesn’t mean that there aren’t buyers out there who can afford to buy a home without a mortgage. The Money Saving Mom blog describes in a series of articles how one couple scrimped and saved to get the money they needed to buy a home in an all-cash deal. Buying a home with cash isn’t for everyone and requires a lot of sacrifices and careful planning. To determine if it is even possible to aim for the goal of buying a house with cash, you may need to work with a financial advisor to put together a plan.

What if you need a mortgage?

If, however, paying cash is too unrealistic of a goal to achieve, you’ll need to plan for getting a home loan if you want to buy a house. Be prepared to provide plenty of documentation about your income and assets when applying for a home mortgage. You also want to have the best credit possible since many mortgage lenders expect you to have a credit score of at least 720 to qualify for the best mortgage rates.

African-Americans and Latinos are less likely to receive mortgage loans as the housing crisis has deepened, according to a recent report from ComplianceTech, a provider of technology and mortgage data analysis for government agencies, nonprofits and financial institutions. The analysis of data from 2004 to 2009 shows that there are disparities in the availability of mortgage credit to African-Americans and Latinos. Members of these groups have more difficulty financing a home regardless of whether they are new home buyers or homeowners looking to refinance.

The sub-prime mortgage crisis

The analysis also debunks the erroneous notion that mortgage lending to minorities was at the root of the sub-prime mortgage crisis. Data in the report show that whites actually received the highest number and dollar volume of sub-prime mortgage loans, and are likely to have more mortgage loans in foreclosure. Whites received 4.1 million sub-prime mortgages between 2004 and 2009, Latinos 1.3 million, African-Americans 1.2 million and Asians 179,000.

The report states:

As the foreclosure crisis threatens the financial stability and mobility of families across the country, it will be particularly devastating to African American and Latino families, who already lag behind their white counterparts in terms of income, wealth and educational attainment. Furthermore, the indirect losses in wealth that result from foreclosures as a result of depreciation to nearby properties will disproportionately impact communities of color.Fewer prime mortgages

African-Americans and Latinos have lower origination rates and higher costs when they are approved for mortgages. Between 2004 and 2009 the market share of prime rate mortgage loans for African-Americans fell 62.67 percent and 61.62 percent for Latinos. The market share of prime rate mortgages grew 12.54 percent for whites and 19.6 percent for Asians.

All racial groups experienced a decline in the volume of prime mortgage loans. African-American prime loan volume plunged to $19.5 billion in 2008 from $82 billion in 2004. Latino prime mortgage loan volume fell to $40.2 billion in 2009 from $171 billion in 2004. Prime mortgage loan volume for whites fell to $876 billion in 2009 from $1.2 trillion in 2004, while Asians saw loan volume decline to $90.6 billion in 2009 from $121 billion in 2004. However, white and Asian borrowers saw increases in prime loan volume between 2008 and 2009, while African-Americans and Latinos experienced declines.

Should you use an inheritance or other cash windfall as a down payment on a home? Obviously, the more money you have for a down payment the better. But is getting a mortgage loan to buy a home the best use of your money at this time?

Do you have a lot of debt?

Owning a home is part of the American dream. But it can be easy to rush into home ownership without really being ready for all the financial responsibilities. For instance, many people apply for mortgage loans even though they have a lot of credit card debt, auto loans, student loans and other bills. Take a careful inventory of your finances and decide whether it makes more sense to use a cash windfall to pay off some of your debt, especially high-interest debt like credit cards.

Do you have emergency savings?

Owning a home means that you’ll be responsible for all maintenance and repair costs. It is not a good idea to purchase a home without having money set aside in savings for routine maintenance and other projects that may come up. It is also important to have money in savings for other emergencies that may occur, such as car repairs, medical expenses or a sudden drop in income. If you have little or no money saved up, you may be better off using your windfall to boost savings.

Do you anticipate a large expense soon?

Are you about to send your kid to college or anticipating some other important event that will cost big bucks? Put together a spending strategy that prioritizes future expenses. As you go through the numbers it may become apparent that this is not the time to get a mortgage to buy a home. You also may find that you need to put together a budget so that you can take care of your financial obligations and still save up for buying a place in the future.

Take time to plan ahead

Avoid rushing into home ownership even if you can qualify for a home mortgage. Too many Americans have made the mistake of getting mortgage loans when they really could not afford them. If you need help knocking out debt and building up a savings, get help from a debt counselor. If you do receive a windfall for a significant amount, a knowledgeable financial adviser can help you figure out the best way to handle it.