The first option to look at is a loan workout plan with your lender. If you are experience difficulty paying your mortgage, you should immediately contact your lender or a housing counselor to try to work something out. If you just need a little time to get back on your feet, your lender may agree to a loan workout plan to temporarily reduce or suspend your payments, allow you to repay what is past due in monthly installments, or provide some other type of relief.
Another option to look at is loan modification. Even if your financial situation is severe and long term, you should contact your lender or a housing counselor to try to work out a solution. Your lender may agree to a loan modification to permanently change one or more of your loan terms. A loan modification may involve a reduction of your loan term, loan balance, or other changes to your benefit and make your payments more affordable. Your lender may participate in the government subsidized Home Affordable Modification program, which gives monetary incentives to both lender and borrower for modifying certain distressed loans. For more information about this alternative click here.
In addition to the above a short sale may be right for your particular financial situation if you feel you will not ever be able to catch up. Selling, however, may be challenging if you are upside down, where your loan balance is actually higher than the property value currently. As with foreclosures, short selling will affect your credit report, and possibly affect your tax liability and personal liability, along with other consequences. However, you may avoid the stigma of an actual foreclosure and allow you to take a pro-active approach in dealing with your distressed loan. Contact a housing counselor. You may even qualify for the HAFA program. Contact a certified HAFA agent.
Also, you may qualify for a refinance, deed in lieu of foreclosure, or bankruptcy. Contact your lender for questions about their requirements for a refinance or deed in lieu. Contact a housing counselor. Remember, doing nothing will only add to your problem and time may eventually not be on your side.