To Mnboy's question, the official language for FHA is, "No foreclosure or “short sale” on principal residence within the past 3 years (unless documented extenuating circumstances)." Interpretation of extenuating circumstances varies from lender to lender when underwriting. I'm guessing that come 2-2.5 years from now, their idea of extenuating circumstances will become far more liberal given what's happened in the last 1.5 years.

On another note, while calling your lender directly for a modification isn't a bad idea because they are often receptive, they are also slammed. Often times, if a consumer initiates his/her own modification, time will run out because the lenders just don't follow up. This is why I favor makinghomeaffordable.gov or hopenow.com because they'll put your case in the hands of a counselor for free. There are some, albeit few, good and reputable loan modifiction firms. Sadly, I know only 2. Astounding. Anyway, if you're with a good one, that's a good way to go too.

Gwen,
If it were easy, everybody would say I quit. Half the people I deal with are in some sort of difficulty with their house. You have to have a verifiable need, it has to be proven on paper that you can't afford your mortgage.
It is called hardship. If you qualify, depending on the lender, contact them for a modification. If that does not work, the seond option is a short sale. Mortgage people, who is right 2 or 3 years to get a FHA mortgage after foreclosure? Is it possible to repair your credit 200-300 points in that period of time?

I agree with what has already been said. You basically have two options. You can try for a loan modification and see if you lender can adjust your terms to something you can afford. If you no longer want to or cant live in the property a short sale is an excellent way to sell the property. Interview at least several realtors to make sure they are knowledgable about short sales as they are totally different than conventional sales. Good luck.

First, you should get a comparative market analysis to see what your house is worth in today's market. Depending on where it stands (short or not) you would then decide whether. . .
1) You sell it
2) Ask for loan modification
3) Sell as a short sale while working with your mortgage bank and a professional and go over, if any, future ramnifications.
4) Go into foreclosure (not the best option)

You'll want to go over your options with the bank, a real estate professional and an qualified real estate attorney.

Kim Eisen
Realtor since 1980
(651) 457-HOME (4663)

You would either want to cooperate with your bank in selling your home if you owe more than the house is worth (also known as a short sale) or attempt a loan modification. In the case of a short sale, the bank would have to take a payoff that would be less than the balance that you owe. Keep in mind that if you persue this option, most lenders would disqualify you for a future mortgage until 2 years had passed. A loan modification is where your lender would consent to adjust the terms of your loan to something you could afford. If you're going to try for a loan modification, start at makinghomeaffordable.gov. If you are interesting in looking into a short sale, call a good realtor. You seem to be in zip code 55104. Adam Duckwall from Edina Realty is a good realtor in that area. Good luck Gwen and I hope you start sleeping better!