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.

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.

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.

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.”

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.