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Millions of people who probably couldn’t afford a home before were offered the chance to take out a mortgage when loose credit and sub-prime loans became the vogue, but now it is time to pay the piper.

This kind of loose credit seemed the perfect path to the dream of a home of one’s own, with little to no down payment and low (even if only temporarily) interest rates.

But the housing bubble burst, and home values are coming down and interest rates are rising.

Rates on these mortgages could be as high as 10% when prime mortgages were available at less than 6%, frequently resulting in mortgage payments of over $2,000 on modest homes. Now, adjustments on the rates are pushing up the mortgage payments by an additional $300 to $400. Re- financing is out of the question since credit conditions have tightened and market values have fallen. (Now the balance of the mortgage is higher than the value of the house.)

How can these borrowers manage? There are some federal programs under consideration that may help, but homeowners have to look into what they can do.

Ignoring the issue is one of the worst things to do. If you know you will be late or unable to pay your monthly mortgage, get in touch with your bank and explain the situation. Often, especially if there has been a change in circumstances, such as loss of a job or an illness, the lender will offer a payment plan.

Get in contact with a counselor. There are counselors who have been chosen by the Department of Housing and Urban Development to work with home owners to advise them in these circumstances.

Pare your budget down to the essentials to lower overall costs. There may be some expenses that you cannot do too much about, especially as food and energy prices are increasing, but non essential items should be examined carefully. Use the savings to pay down high interest credit card debt and save even more.

Discover if you may be a candidate for assistance. The federal government has a new program for low income families that will let them roll over into a 30 year fixed rate home loan, as long as they were current on their loan before their ARM rate reset.

There are some more desperate solutions, but, depending upon the situation, some homeowners should consider them.

Dump the property. You may be forced to sell at a loss in today’s falling housing market, but some banks may take whatever proceeds to settle the loan. It is better for them rather than endure a prolonged foreclosure process.

Choose bankruptcy. This last solution is not at all attractive, since it will have a negative effect on your life for many years. Your credit rating will, of course, be even further damaged, but your loans will be consolidated and some even eliminated, allowing you to catch up on things.

There are solutions to be found, but the borrower with a problem mortgage cannot afford to bury his head in the sand, but rather get out there and search for the solution.

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