Whether your current financial problems are the result of an unexpected, life-altering event (such as the death of a spouse, loss of a job, etc.) or the result of a long-standing, growing problem managing income, debt and expenses, sometimes cutting back on expenses isn’t enough. Sometimes you are faced with the reality that your current lifestyle, or the expenses you maintain on a regular basis, simply cost too much.

If you are at this point you are likely beginning to think about making some difficult decisions. One of the most significant issues that people in a financial crisis face is how to hold on to their home. It’s a question a lot of people are asking. During the second quarter of 2002 the Mortgage Bankers Association found that mortgage foreclosures (losing your home because you can’t pay your mortgage) had hit a 30 year high. With interest rates at their lowest in years, how is it possible for a record number of people to lose their homes?

People got in over their heads. Also known as being “house-poor.” This is when someone pays more money on their mortgage than they can realistically afford. Although you may qualify for, and be approved for, a certain mortgage amount it may not be possible for you to actually pay that much money each month once you factor in your other living expenses.

People refinanced or took out home equity loans but extended their debt. People withdrew money/equity from their home when they refinanced or took out a home equity loan then used the money to pay off their credit card debt, but forgot to cut up the card and instead ran that higher-interest consumer or credit card debt up again. Now they’re faced with still outstanding consumer credit debt that they may not be able to pay and they have less money invested in their home.

Cost of homeownership has risen. Many costs associated with homeownership such as property taxes, utilities, etc. have outpaced inflation, meaning that the costs of owning a home have actually risen at the same time that wages or income from working have not risen or have not risen as much as the costs of owning a home.

Unemployment and underemployment have risen. With the economic downturn, loss of jobs in technology and related sectors, and the permanent loss of manufacturing jobs that offered good wages and benefits, a significant percent of the American population has experienced periods of unemployment. What has been disturbing to many families is discovering that unemployment has lasted longer than they have expected or that when they do find work, the jobs available pay less and offer fewer benefits than their old job (being “underemployed.”)

Before assuming that you will have to file for bankruptcy to save your home or face possible foreclosure, let’s consider a few keys to holding on to your current home.