Are you facing foreclosure?  Is the bank looking to reposes your home?

We are facing tough economic times, and with the prices of housing falling—and due to fall more once the prices fall after the expiration of the Obama Stimulus plan—many people have found themselves behind on their mortgages without the ability to make their payments.  Some now owe more than their house is worth.

One solution, that has received a lot of press, is that of just walking away from the house and mortgage.  The idea is that the person that took the loan returns the collateral to the bank—walking out of the contract.

However, this will destroy your credit rating for the next few years, and it will also mean that you will have to find another place to live.

Another option, which would seem better is by having a short sale.  Basically, this means that you would sell your house to a third party for less than your mortgage, and the lender would take the loss of the difference.

This is good for the lender—they get money and not a house that they cannot get rid of and aren’t going to maintain.  It’s good for the borrower because it’s not the same credit hit.

Best to remember the lesson of the housing crisis:  Don’t buy more of a house than you can afford.