I’m not a fortune teller, soothsayer, or any other predictor of the future. The economy  is what it is, and shall be for at least several months from now. People have lost their jobs at an alarming rate. We read it in the paper, the web, and see and hear on radio and TV. The housing market controls the economy, they say, but I believe the economy drives the housing market. The job lost, down turn in retail sales / manufacturing, and with companies  going out of business have led some of us to a place we have never been before.-Unable to afford the home we so longed to have. If you find yourself in this situation, you are definitely not alone!  Sometimes the loss of the house  is unavoidable due to financial concerns. It is hard to face this fact. The reality is you have some options.

Most people with a 401K can take money out without penalty  to  get the mortgage current or to save it from foreclosure. I didn’t know if you knew this.

Give the house back to the bank “in lieu of foreclosure” You can contact your bank and discuss this with them. This will not count as a foreclosure against you and the credit hit is not as severe. This is easier when the house is in good shape. The stays on your credit report for about 3-4 years as a rule.

Stay in the house until the dreaded forced “foreclosure” when you are actually forced out. I would say this is the most challenging and damaging to your credit. Foreclosures usually stay on your credit report for 10 years and is hard to run from. Banks do not like this to happen, because of all the legal issues that accompany it. The banks tend to be more forgiving to your credit in a short sale or just giving the house back.

The “short sale” in most cases is the best scenario. The term short sale simply means the fair market value for the house is less than the mortgage. Several things have to happen to allow this. The bank will ask for the financial information from the sellers to make sure they can not pay the full amount. In this day and age that is not hard to do. You will need a realtor to do a competitive market analysis to show the bank  the true value. Then it is just a matter of marketing the house at a selling price that satisfies the buyers and the bank. The difference of the amount owed and the sold price is the short sale amount. This will hit your credit, but it is the least damaging.  Credit hit is 2-3 years as a rule.

Contact a realtor and ask questions concerning your options.

Bank owned properties and short sales are the things driving down the value in the housing market. It will be this way for awhile.  So, if you need to give it back or short sale it, you are not alone. Do what you need to do to help you and your family.