Want to stay in your home and sleep better at night? Read this.

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If you can't afford your mortgage payment, a counselor will review your income and expenses, help you gather documents and determine if you might qualify to refinance to a lower interest rate — and monthly payment. If your home has dropped in value, or your credit rating has already taken a hit from rising debts and a loss of income, refinancing might not be an option. The counselor can contact your loan servicer and help negotiate relief options.

With a non-profit counselor, this service should be gratis. "Beware of anyone who asks you to pay a fee in exchange for a counseling service or modification of a delinquent loan," says Gail Cunningham, a spokeswoman for the nonprofit National Foundation for Credit Counseling. She warns: "Scam artists often target homeowners who are struggling to meet their mortgage commitment or anxious to sell their homes."

2. Contact your loan servicer to review options. "It is important to communicate with your lender," says Anthony Warden, executive director of collections & recovery at USAA Federal Savings Bank. "If things are going badly and you're starting to struggle, the earlier you pick up the phone and call, the more options there will be," he says.

To get you back on track, a mortgage servicer might give you a fixed amount of time to repay the amount you're behind — adding a portion of what is past due to your regular payment.

If you're more than a few payments behind and nearing default, your servicer might permit you to pay the entire past-due amount, plus any late fees or penalties, by a certain date.

And if your financial trouble is temporary — say, you're on disability leave from a job and expect to go back full time shortly — your servicer might reduce or suspend your payments for a period. At the end of that time, you might resume making your regular payments, plus a lump sum payment or additional partial payments until you bring the loan current.

3. Ask about a loan modification. This is essentially a change in terms by lowering the interest rate, converting an adjustable-rate mortgage to a fixed rate or extending the repayment term in order to reduce your monthly payments. In general, borrowers must document their income and expenses and provide evidence of hardship or a major adverse change in their financial situation. You'll need to provide recent pay stubs, current W-2 forms and your latest tax return, bank statements, property tax bill and insurance bills.

In the best scenario, you and your loan servicer would agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. They might also reduce or suspend your monthly payments for a specified period, after which you would resume your regular payments and pay an additional amount each month to make up for the delinquency.

Keep good records of your conversations, and be patient. Loan servicers are besieged with requests. So it's up to you to be diligent about following up to be sure paperwork has been received.

4. Explore the Home Affordable Modification program. To curtail home foreclosures, the Making Home Affordable plan was introduced last spring. It got off to a slow start. As of December 2009, only about 4%, or 31,382, of the 728,000 homeowners currently in the program, have moved to a permanent loan modification, according to the program website.

But if you qualify, it could possibly grant you relief:

The benefits? The program:

• Cuts mortgage payment to 31% of income for an average savings of $550 a month, but borrowers must be delinquent or in imminent danger of default.
• Could cut your interest rate as low as 2%.
• Could extend the loan term to as long as 40 years.
• Could defer a portion of the loan balance.

Servicers participating in the program are swamped with customer requests, so you'll need to be persistent. To learn more, go to MakingHomeAffordable.gov.

5. Sell Your House. Depending on the real estate market in your area, selling your home may give you the funds needed to pay off current mortgage debt in full, plus the expenses connected to selling the home, such as real estate agent fees. Servicers might push back foreclosure proceedings if you decide to sell your home.

If your servicer agrees to let you sell the home before it forecloses, it could agree to forgive any shortfall between the sale price and the mortgage balance. This approach, called a short sale, shows up on your credit history, but some lenders may be willing to offer a new mortgage as little as two years later if your credit is otherwise good. After foreclosures, a borrower typically must wait at least seven years before a bank is willing to grant a new mortgage, USAA's Warden says.

Another option you might consider is voluntarily transferring your property title to the servicer in exchange for cancellation of the remainder of your debt. Through this process, called a deed in lieu of foreclosure, you lose the home and any equity in the property.

"Both options, similar to a foreclosure, hurt your credit record and score, but they can reduce the potential legal cost and hassle of going through a foreclosure," says Gerri Detweiler, personal finance expert at www.credit.com.