"For several years, economic analysts have predicted a housing bubble. Now, attention has turned to the bubble's companion, the flood of risky mortgages that buoyed homebuyers over the last decade," Housser explained. "These loans launched an armada of homeowners who now cannot afford their mortgage payments -- especially those homeowners who hold adjustable-rate mortgages (ARMs) and are seeing payments increasing."

The mortgage market meltdown has resulted in seas of foreclosed homes for sale. Now, the mortgage industry has examined loans that have left buyers in the lurch, and clamped down on "easy" loans. "As the wave subsides, lenders will tighten standards to cut off available credit to millions of people who would have qualified under the old standards," Housser predicted.

Saving an ARM or interest-only loan: "Homeowners who chose these loans are worrying," Housser said. After the initial period expires (which can be as short as one year), ARM rates can adjust -- and increase -- annually. Interest-only loans begin with a lower payment, but payments jump after a few years when principal payments start to kick in. In the past, homebuyers with one of these types of loans often assumed they would be able to refinance to a fixed-rate mortgage when their equity increased. Slower home increases (or no gains at all) have put those plans on hold for many. In addition, mortgage refinance applicants now face tightened underwriting criteria.

1.   Homeowners with an ARM: Interest rates are projected to stay low for the time being, said Housser. He suggests homeowners should check their credit score (available for free once a year at http://www.annualcreditreport.com). Then, he suggests, build the score by paying bills on time and reducing or eliminating debt on credit cards (but not closing open lines of credit). This will position homeowners to refinance to a fixed-rate loan at a better interest rate.

2.   Homeowners with an interest-only loan: "Find out when principal payments kick in," Housser said. "Call the mortgage company if you're unsure." Those who cannot make the higher payment can consider refinancing, getting a raise, taking a second job, or acquiring a roommate. Otherwise, consider selling the home. Allow plenty of time, as homes are moving slowly in many areas of the country.

For those having trouble paying: Missing mortgage payments creates a major blotch on a credit rating, said Housser. He suggested ways homeowners can attempt to save their homes:

1.   Reduce expenses: Eliminate flab from the budget. Cut out cable TV, extra cars, dining out, vacations, gym memberships, gifts and unnecessary shopping to provide extra cash to pay the mortgage.
2.   Add income: See #2 above regarding additional income streams. Those who received a tax refund this year could decrease withholding to provide more incoming cash (discuss this with a tax advisor).
3.   Refinance: Some homeowners struggling with a mortgage and additional debt from a line of credit could refinance into a single loan with a lower fixed rate.
4.   Call the lender: Homeowners with short-term problems should call the lender and explain, Housser said. Lenders might give you a temporary reprieve -- called forbearance -- rather than face foreclosure.
5.   Sell now: "No one wants to throw in the towel on their home, but taking a small profit -- or even none at all -- is worth it if the only other alternative is a likely foreclosure," Housser said.
6.   Get help: If extraordinary circumstances prevent payment, and the home is unlikely to sell -- or a sale won't help the owner's financial situation -- the homeowner can seek help from a reputable debt resolution company.

For those looking to buy: The good news is that, for those who can qualify for (and afford) a mortgage, interest rates will remain low in the near future, Housser predicted. "Make sure you get into a product that you can afford, and be wary of ARMs that reset in a few years unless you are confident that you could afford a potentially higher payment down the road," he suggested.

A home remains a valuable investment, and the American dream is still within reach for most people. The process just might take a bit longer -- and require better financial health before homeowners dive in.

Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and save money by choosing products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. Since 2002, Bills.com and its partner company, Freedom Financial Network, have served more than 15,000 customers nationwide while managing more than $350 million in consumer debt. The company's co-founders and CEOs, Andrew Housser and Brad Stroh, were named Northern California finalists in Ernst & Young's 2006 Entrepreneur of the Year Awards.