The best and most obvious way to avoid foreclosure is for the homeowner to stay on top of his or her mortgage payments. Lenders generally want to avoid foreclosure as much as homeowners do. However, lenders are for-profit enterprises, and they will seek to recoup their loan using any means at their disposal, including foreclosure. However, foreclosure is usually a last resort.

Remember; lenders do not really want the house. They instead want the money back from the homeowner’s loan plus interest. Most foreclosures result in the lender losing money or just breaking even.

Homeowners can avoid foreclosure in a number of ways.  The most obvious is to not enter into a mortgage he or she cannot afford.  Buying a house is a huge financial decision, and it may be worthwhile to consult with an attorney to help explain the mortgage terms so the homeowner completely understands what he or she will owe. 

If the homeowner misses a few payments due to a brief financial hardship, the lender might allow payments in installments, on top of the homeowner’s regularly scheduled payments.  Most lenders are willing to consider revised payment plans.  Remember, the ultimate decision to foreclose rests with the lender.  If the homeowner anticipates financial problems, contact the lender and be honest with them.

If the homeowner is given a notice of default (a notice of the lender’s intent to foreclose), the homeowner’s options become far more limited. At this point, the homeowner might consider a short sale. This is when the house is worth less than the amount owed, but the lender agrees to allow the homeowner to sell the home at its current value, and accept the sale price as final payment of the debt. For most people, this option is only slightly more attractive than foreclosure, and should be considered as a last resort.