Short Sale, Loan Modification, or Foreclose on House?

Sorry to come off as harsh, but the original agreement with the bank (the mortgages you have in place) are decisions you made. In good faith, you agreed to the price and you agreed to the loan repayment terms. I think it's irresponsible to feel like the bank should accept less in return from you because you don't feel like paying what you said you would or because you could get a better offer elsewhere or because your soon-to-be-ex might get something nicer.

Between you and your husband, you either need to decide to sell the house (sounds like at a loss) or keep it for one of you. You are lucky that the bank would modify the loan to $400/mo less to the point where you could afford it. Some people can't even get that break in this economy. If you short sell or foreclose, you aren't going to be able to get credit for many years, nor should you. All of your credit remarks will be around for at least 7 years, and banks are now pushing to make that time period longer.

Sorry that it looks like you might have to go back to work even if it's hard for you, but why should you be entitled NOT to work and earn for yourself and your children, especially if you can find a job? There are lots of working mothers who might rather stay at home with their children but have to earn money to support themselves. No one promised that life would be easy or a free ride. It looks like things are tough for you now. I wish they weren't, but looking for an easy way out isn't the answer.

Okay, so I short-saled my home. You can't buy right away because you stop paying the mortgage as soon as you start the process and that hits your credit for 2 years. So, you can't buy for another 2-3 years. I had 2 mortgages as well. I am now renting a bigger home for $500 less than my mortgage was. I am not sure if everyone knows this, but short-saleing is not cheating the gov't. It is not just for people who cannot afford the mortgage. It is also for those who owe a certain percent more than their home is worth, regardless if they can pay it or not. Now, I had a great experience with the short sale, it went really smoothly. I know others that have not. If it were me, I wouldn't want to stay paying on something I will never get my money back on. Whether your husband does, is up to him. I personally would opt out. That is just my opinion. Bad thing about the short-sale, if it doesn't sell, you will go into foreclosure until you have a huge chunk of change to catch you back up. That hits your credit for 7 years. For us, it was worth the risk. Only you can decide if it is worth the risk to you. Good luck with whatever you decide, this must be a very difficult time for you. Also, you might want to look up rentals in your area because in our area, holy cow, it is a landlord's market! Rental prices have really gone up in the past year, lucky for us we got in at a good time. Hope this helps!

I am sorry for the rude answers!! I am in the same place as you and I had to let my house go. Not fun and not what I had planned for my life but life is not what we planned!! I don't know anyone who gets divorced and says. "I wonder what I can get in the divorce!" (Maybe Anna Nicole) We all have to do what is best for us and sometimes that does not look good from the outside. I let my house go because I tried loan modification through the government three times and was turned down three times. My house has fallen so much in value that it is crazy. I have two mortgages and it was a whole lot for me to pay. I can rent for about half that much. I don't know how easy it will be to rent but I have a friend who owns some places and she says that she will help if no one else will. It is a hard economy right now!! Good luck, I know however you decide it will mess up your credit for quite a while.

My opinion is to approach the situation a bit differently. Staying in your home gives your kids stability - especially if mom and dad are going through a divorce. Divorce can be devastating for kids and losing their home is another tough situation for them to deal with. I vote that you do a loan modification and get a job to stay there. Its all about the kids....

I would avoid foreclosure at all costs, since it damages your credit most severely and prevents you from buying another house for the longest length of time. With a short sale, it deducts half the points from your credit that a foreclosure will, and last I knew you could buy a house again in 3 years. I am not familiar at all with loan modification and how it impacts credit, etc. but my guess would be it's at least better than foreclosure. Not sure how it compares to just short selling. The biggest thing though with short selling, is how long the process is. If you don't have a long time to sell the house, then this probably isn't a great option for you. I've known several friends/family members who either bought a short sale or were short selling their house and no one completed the process in less than 5-6 months. It really is a nightmare, but worth it either to get the cheaper price or to sell your house without foreclosure. Sorry you are facing this predicament! Good luck to you both.

Jennifer is right...AZ has an anti-deficiency law, which means if you allow the house to foreclose, the bank can/will sue you for any amount above and beyond the original mortgage amount used to buy your home. They WILL sue you for the amount of your second mortgage, and maybe for some of the first mortgage if it was refinanced at any time. (And don't think they won't, because they always will if they can. Then they'll empty your checking account, garnish your wages, etc, etc. It can get really nasty.) A foreclosure does stay on your credit for 7 years (give or take) and you will likely be unable to get another mortgage until after that time.

Second, a short sale stays on your credit for about 3 years, and will also affect your ability to get another mortgage. Do you really want to move that much in just a few years with the divorce and the kids dealing with all of this?

Last, a loan modification...I work for an attorney who does specialize in real estate. I've seen time and again clients who were told that they were going to be granted the modification, so they were allowed to start making the new payment. Six months to a year later (or more), they were told that the modification was revoked due to a paperwork error (or you name the excuse) and they owed the rest of the full payment immediately or they would face foreclosure. (Try coming up with up to $4K when you're already strapped!) Be careful on this one too, because you can get burned and end up in a foreclosure situation anyway.

Unfortunately, it looks like you've got a tough decision to make. Another option you did not list is a deed-in-lieu of foreclosure. This is where you sign the house back to the bank and they agree to walk away from any deficiencies. Banks will sometimes do this to shorten the foreclosure process, but you will have to check with your bank if they are willing. A deed-in-lieu is the easiest on your credit of all the options because you don't miss payments while waiting out the process. Make sure the bank knows about both mortgages when asking about this. Best of luck! I know times are tough right now for you, but you will come out stronger in the end!

Wow--some people need to do their homework here. I really dislike judgemental people when they dont know what they are talking about.
Anyways, we are currently going through a short sale on our house. It is not because we cant afford the mortgage. It is because we want to move out of our judgemental neighborhood and are 100k upside down in the home (our fabulous judgemental, uneducated neighbor called our realtor and threatened him for this too) In your case, I would probably short sale the house. It will affect your credit for 2 years, but does not lower your credit scores like a foreclosure. We will be renting for atleast 2 years. Talk to a realtor who has experience and deals with short sales though, because there are ways around selling and buying another house right away (we want to wait to make sure we are in the right neighborhood next time) Just to warn you, it is a very lenghty process. It might be a benefit for you though with the transition. Atleast if you did this you would both be able to walk away from the house and start over. Good Luck to you!

I went through something similar this past year. My ex and I owned a house. He moved out and we seperated. We ended up short saling the home because we were upside down $200,000. We didn't take much of a credit score hit. But it did ruin my credit overall. I had decent credit. Now I can't get a credit card or loan to save my life. I was told that even though I have decent credit, the short sale is a big red flag on my credit. My understanding is that it takes at least 2 years to be able to buy a house.
My understanding is that he can not just give you the house and take his name off the loan. You would have to get a job and the you would have to take out a loan for the house. Basically buying it from him. But no one is going to just give you a loan until you have a steady for an extended period of time.
Is your name on the loan. Honestly I would give him the house. The furniture and such should be divided. You have a lot on your plate and that will be an added burden.

Call Thadeaus Jones @ Chase bank ###-###-#### he can help you with alot of those questions. Pick his brain he will totally give you straight and true answers. So many of my friend have used him and are very impressed.

Why don't you see a real estate attorney before doing anything. We were thinking about doing something too so my realtor told me to spend the $300 and sit down with an attorney. You also mentioned that you have a 2nd on your house. From what I am hearing, the mortgage company can go after you for a 2nd mortgage because it wasn't used to purchase your house. (unless you did an 80-20 loan or an 80-15-5 loan). If you can spend the money and sit down with an attorney because he can tell you exactly what to do in your special circumstance and what to expect. To me it would be worth every penny.

Good luck!

ur might lose ur home but yet can afford to buy another? i try modification.