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I Can't Afford My Home, What Should I Do?

I can't afford my home, what should I do?

We need help! We live in oregon and bought our home in 2006, we payed $169900. My wife was laid off in Jan. 09, and can only find part time work, her unemployment will run out in 13 wks. We have been working with the 1st to modify and just received documents stating the modification on the 1st will be lowered by only $95 a month. A home around the corner with 2 more bedrooms and 400 more square ft just sold for $39900. Many homes in our neighborhood are in foreclosure because they could not short sell. We are upside down, my work is cutting my hours, and I don't think we can continue to make the mortgage payments. What should I do?

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Bill's Answer
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You have several options if you cannot afford the modified mortgage payments. You can do a short sale, deed in lieu of foreclosure, foreclosure, or bankruptcy. Each of these options will impact your credit score with different levels of severity.

Short Sale

A short sale is where the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. The lender would much rather see you sell the property than be forced to take the property through foreclosure, as foreclosure is a costly and time-consuming process. You should contact your mortgage lender to discuss what it can do to assist you in selling the property through a short sale, and what are its procedures and requirements. Explain to the lender that you cannot afford your mortgage payments, and that you need to sell the property through a short sale to prevent foreclosure. Generally speaking, upon completion of a short sale the debtor is not liable for the deficiency balance. However, readers have reported that some lenders are pursuing debtors for the deficiency balance. The impact of a short sale on your credit score will be slight. To learn more about short sales read information on effect of short sale on credit score.

Deed In Lieu of Foreclosure

In a deed in lieu of foreclosure, the property owner surrenders the property to the lender voluntarily in exchange for the lender canceling the loan. The lender promises not to initiate foreclosure proceedings, and to terminate any foreclosure proceedings already underway. The lender may or may not agree to forgive any deficiency balance that results from the sale of the property. The impact of a deed in lieu of foreclosure on your credit score will be slight. Read A Deed In Lieu Of Foreclosure vs. A Short Sale to learn more about both of these options.


You should pursue all available alternatives to foreclosure. Foreclosure is the legal process through which a lender (most typically a mortgage lender) claims an asset from the consumer borrower. Foreclosure is almost always a last ditch option for your mortgage company, and should typically be the last option, aside from bankruptcy. A foreclosure can severely impact your credit score for up to seven years. To learn more about foreclosures please visit Judicial Foreclosure and Foreclosure Information with Advice and Assistance.


Bankruptcy is a complicated process, including Chapter 7 bankruptcy and Chapter 13 bankruptcy options for consumers seeking to get debt relief, unfortunately, after the passage of the Bankruptcy Reform Act in 2005, it became harder to file for a liquidation bankruptcy, and there is now more complexity to an already intimidating process. Bankruptcy is a last resort and will appear on your credit report for 10 years, although its practical impact is much shorter. To learn more about bankruptcy I encourage you to read Types of Bankruptcy.

If you are considering foreclosure or bankruptcy I encourage you to consult with an Oregon attorney who has experience in bankruptcy matters.

I hope this information helps you Find, Save, and Learn.



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  • MF
    Burlington, WA,
    Jul, 2012
    we are getting a divoces after 30 years, don't know what to do with the house. we owe more on it then it worth.neither one of us can afford the payment.any ideas on what to do?
    • BA
      Jul, 2012
      First of all, remember that any agreement about the mortgage loan must be done together with the lender. It is not enough to draw up a divorce agreement which transfers the house to one party, because you will need the lender's agreement to release a borrower. Make sure that the divorce lawyer does not just agree to a clause that one party will take care of the house and the mortgage.

      Is it possible that one party can refinance the house with the HARP mortgage, which would allow for lower payments? You could then decided on how to divide up all the property, considering one side is picking up a house with negative equity.

      Your other option is to speak to the lender about a short sale or deed-in-lieu of foreclosure. You will need to negotiate the deficiency balance. Check with your lawyer regarding your state's anti-deficiency and non-recourse laws. Also check with the lender regarding principal forgiveness and terms to repay the deficiency balance. You can try to negotiate with the lender an agreement to split the deficiency balance, although most lenders will oppose that.
  • TW
    Falls Church, VA,
    Mar, 2011
    Good luck with HAMP. The Administration's outgoing TARP director just said he would give HAMP a D+ in helping people to avoid losing their homes. Case in point, my income was slashed 60% from the time I took out my mortgage 4 years ago. My wife finished school and after graduation she worked for about 4 months to raise our son (our decision). I am now making 40% less than when I took out the mortgage and we can barely afford our bills--actually in the hole each month. I have applied for HAMP almost half dozen times and never gotten anywhere, been rejected for a loan modificationa and can only get a forebearance, which could really mess up my credit rating. Relying on these programs for help is setting yourself up for disappointment. I have one or two options left, including cashing in an IRA to pay off a secondary mortgage (used 4 years ago instead of PMI) or I simply walk away.
  • BA
    Mar, 2010
    You appear to be an ideal candidate for the Home Affordable Modification Program. It has no affect on a person's credit score, to the best of my knowledge.
  • L
    Mar, 2010
    My husband and I bought a house in October 2009 we were just fine money wise then in January we had to take a pay cut and now the mortgage payments are a little more than we can handle what can we do without messing up our credit?