Foreclosures Are Rising. Here's What to Do if You Can't Afford Your Home

During the pandemic, many U.S. homeowners fell behind on their mortgage payments after losing their jobs. At the time, there were protections in place that prevented those people from losing their homes to foreclosure. But now that those pandemic-era benefits are a thing of the past, the number of foreclosures in the U.S. is rising.

Almost 96,000 properties were foreclosed on during the first quarter of 2023, according to real estate data provider ATTOM. That's a 22% increase from the same quarter in 2022.

Of course, being foreclosed upon is nothing short of a nightmare for the people who end up in that situation. Not only does it mean losing a home, but it also means sustaining extensive credit score damage. So if you're having trouble keeping up with your mortgage payments, your best bet is to reach out to your mortgage lender and try to work out a solution.

When you can't keep paying

These days, many U.S. homeowners have a fair amount of equity in their homes. If you're not underwater on your mortgage -- meaning, your home could sell for a high enough price to pay off your mortgage balance in full -- then you may have the option to sell your home if you can't make your mortgage payments any longer. But if you're looking to stay in your home, this option clearly won't be ideal.

In that situation, the most important thing to do is reach out to your lender and let it know you're having difficulty making your payments. From there, your lender might come back with a few options that allow you to stay in your home and avoid foreclosure.

One option that may be available to you is forbearance. Forbearance allows you to pause your mortgage payments for a period of time. You won't be considered delinquent on your mortgage if your loan is put into forbearance.

Another option you might be able to work with is loan modification. When you go this route, you don't get a new mortgage as you would with a refinance. Rather, the terms of your existing mortgage are changed to make your loan more affordable to you.

Under loan modification, you may be able to lower your monthly payments by extending your repayment window. That could mean paying your lender for a few extra years, but getting the near-term relief you need to keep making payments.

Your lender may be surprisingly willing to help

You might assume that your lender won't do a thing if you run into an issue with paying your mortgage. After all, why would it when it could simply foreclose on your home instead?

But one thing to realize is that foreclosure is not a pleasant process for lenders, either.

Lenders want to collect their interest and make money. They don't want to have to deal with home sales. So often, lenders are motivated to do what they can to avoid foreclosure -- not necessarily out of the goodness of their hearts, but because it's less logistically and financially taxing. That's why reaching out to your lender really is your best bet when you've run into hard financial times and you're at risk of falling behind on your mortgage payments.