But suddenly, a cosmetics business they ran began to dry up after one of the major stores at the mall where they operated shut down. They plowed their own savings into the business to try to keep it going. Despite Candice's income as a full-time engineer, they soon fell behind on their house payments. Vaughn's efforts to renegotiate with the loan company resulted only in an offer that he couldn't meet: $20,000 in cash by July.

The last straw: The interest on their ARM was poised to reset from 6.7 percent to about 9 percent as of that month.

By May, Vaughn was desperate, believing that a foreclosure notice could come any week. "I was asking God to show me the way," he says.

Through a news article, he learned about a nonprofit organization in Chicago that had partnerships with several loan-service companies, including his own, to help prevent foreclosures.

He contacted the group, the National Training and Information Center (NTIC), which cut a deal with the lender. Vaughn and Candice won a loan modification that shifts them from an adjustable to a fixed-rate loan. They'll owe $4,200 a month, but that should work for them now that they've closed the money-losing cosmetics business. The deal also helps their creditor avoid the costs of foreclosing and selling the house.

Not every strapped homeowner has such good fortune. But the financial rescue of this Maryland couple can happen for others, too. "I'm living proof," Vaughn says.

Housing experts say people faced with possible foreclosure, or a big upward reset in what they owe on an ARM, might consider this advice:

Know the value of your home. Selling probably isn't your first choice, but it's important to know whether the house could be sold for enough to pay off the loan, plus closing costs. Ask a real-estate agent for a free estimate, while mentioning that you have no immediate plans to put the house on the market. Also check out Zillow.com, an online real-estate information Web site that provides home-value estimates.

Consider refinancing. If your credit is poor, refinancing may not be possible or will carry big fees, but if a deal sounds good, get an estimate in writing. You can consider whether the offer is worthwhile by using an online calculator such as Financial Calculators (look under "Home & Mortgage").

Talk to your lender. Troubled homeowners may want to run and hide, and lenders may seem unresponsive, but "the longer you wait, the fewer options you have for a workout," says Ren Essene of Harvard University's Joint Center for Housing Studies. Keep records of when you called and whom you talked to.

Seek a loan-modification deal. If you're heading into default, ask to speak with someone in your mortgage lender's "loss mitigation" department. This individual generally has the authority to set new terms for your loan to avoid foreclosure. "Lenders will often ask for good-faith money toward a modification," so hoard cash if you can, says Michele Rodriguez Taylor of NTIC.

Get help. Some nonprofit groups can serve as a go-between with the lender or can offer advice about your options. A nationwide HOPE Hotline (888-995-4673), run by the Homeownership Preservation Foundation, offers counseling. Through the group Neighborworks, it provides referrals to local organizations that can act on your behalf. Some states have set up rescue funds for homeowners. The federal Department of Housing and Urban Development offers links to community groups, among other aids, on its Web site.

Beware of "rescue" scams. If someone calls out of the blue and offers to repay your loan if you sign the deed to them or asks for lots of money to help you stay in your home, hang up.

Selling may be best. "Consumers will do everything to keep their home, even if it's irrational," Essene says. Some refinance multiple times, draining their equity in the home, and still can't afford to keep it. They would have been better off selling sooner, she says.

Choose the lesser of evils. Foreclosure is generally the worst outcome for homeowners, blackening their creditworthiness for years to come. For families on the brink, some alternatives include a "deed in lieu of foreclosure" transfer of ownership to the lender. In other cases, the lender may let you sell the home for a value that won't fully pay off the loan.

Amid these troubles, it's important to keep the challenge in perspective. The current housing market, financial experts say, is tough for just about everyone.

"It's become tighter across the board" for borrowers, says Celia Chen, who tracks housing issues at Moody's Economy.com in West Chester, Pa. "There are few subprime loans being written. [But] for someone who has built up equity and is a prime borrower, they'll still be able to refinance."

Tips for mortgage shoppers

If you’re looking to buy a home, loans are available -- but new terms and conditions apply. Down payments are in. Mortgage approvals without documentation are out. Despite the downward spiral of lenders who financed high-risk borrowers, prime "conforming" loans (less than $417,000) still are available, says Holden Lewis, a senior reporter at Bankrate.com, which tracks credit markets. But jumbo loans (more than $417,000) now carry higher interest rates than they did a month ago, he says, and lenders require down payments of 5 percent or more.

Financial experts offer this advice:

• Educate yourself. Community-action groups often provide free buyer-education seminars. Visit Web sites of government housing agencies, especially www.hud.gov, for guidance.

• Patch up any credit problems. For people with credit scores below 620, "there are very few options," says Chen.

• Shop around. This is especially true now. If an online mortgage lender can’t help you, maybe your local bank can.

• Think realistically. With home prices under downward pressure, don’t count on rising values to outpace your interest costs.