Breathe deep. Relax. A first missed mortgage payment is not the end of the world, but you will want to immediately contact your lender and an FHA home counselor if you are worried that the situation may become worse.

Just like every other loan, FHA home loans have rules for delinquent payments and foreclosures. Typically, homeowners can avoid default or foreclosure by taking early action to address the situation with their lender. The Federal Housing Administration has very clear guidelines to manage foreclosures on FHA home loans; if you have the right information, you can keep your home finances in order.

And nowadays, especially in the wake of the burst housing bubble, the FHA and the Department of Housing and Urban Development have a number of options to help assist homeowners who are afraid they might miss a payment or have already missed a mortgage payment.

Foreclosure is a tough reality to face, but it can be managed if you take the proper steps early in the process. Here are a few things you can do to make sure foreclosure doesn’t take you by surprise.

Don’t Ignore Your Bank

A first missed payment will not automatically start the foreclosure process, but it will prompt your lender to contact you. It is far better to reach out to your lender and the FHA to talk with them about your fears and build a plan to manage your payments.

Make sure you open and respond to all early mail from your lender. Early notices will include information about foreclosure prevention that can inform you on your options.

If you miss a second payment, your lender will definitely call, write and even email you. It is very important that you respond to those calls and engage with your lender. Talking to your bank is the most important action you can take, since many will still allow you to make a full or partial payment to avoid a third missed payment, which is when the foreclosure situation becomes dire.

After a third missed payment with no arrangement with your lender or the FHA, you will be given 30 days to bring the loan up to date. That’s three months of payments, plus any legal fees incurred by the bank. If you have not spoken to your lender or an FHA housing counselor, you still have time to work out an arrangement. Once your 30 days expires with a fourth missed payment, the lender’s attorney will schedule a sale – the absolute final date to pay the full amount owed.

Talk With the FHA

Hopefully, you know by now that communication is critical. Many homeowners make the mistake of thinking that they have more time, or that they will not lose their home. Unfortunately, this is just not the case for many homeowners.

Usually, the best time to initiate communication is before you miss a payment. If your financial situation has changed due to mortgage increases, job loss, or other reasons, you should contact a Housing Counselor or your lender before you miss a payment. HUD Housing Counselors will help you understand your rights, organize your finances, and even represent you in negotiations with your lender.

Prioritize Spending

Keeping your house — your shelter — should be among your top priorities, along with healthcare. Review your finances and trim down optional expenses like memberships and entertainment. Focus on your shelter, food, power and water over credit cards or other debt.

Avoid foreclosure prevention companies and scams

While there are many businesses that will offer to help you manage your foreclosure, you are better off using that money to pay your mortgage instead. Some companies will charge a fee equal to two or three months of payments for services that you could receive from your lender or a housing counselor. Also, be wary of any firm that claims they can stop your foreclosure immediately if you appoint them to act on your behalf. Never sign any legal document without first getting advice from an attorney or real estate professional you absolutely trust.

The biggest thing to remember is if you think you might soon have trouble meeting your mortgage is that you are not alone. It can be difficult to admit that you will not be able to make your payments, but the sooner you begin communicating with your bank, the sooner you can work to find a solution. FHA loans were created to help Americans buy and keep their homes, and most lenders would prefer to help you keep your home.

Make sure to read your loan documents thoroughly to understand your rights and obligations. If your lender is not cooperating with you to make an arrangement regarding your FHA loan, you can contact the FHA directly to find a solution. Remember, communication is key to avoiding foreclosure, so start early and call often.

Brian Russell is a freelance writer for mortgage company New American Funding, a Fannie Mae Seller/Servicer, FHA Direct Endorsement — HUD Approved, and VA Automatic mortgage lender with over 400 employees. The company is licensed in 21 states across the nation and offers a variety of home loan options, including FHA, Conventional, VA, HARP 2 and Jumbo Loans.

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