Underwater Mortgage Options

And astounding 3.2 million households in America cannot afford their monthly mortgage payments. This is often referred to those in the industry as an underwater mortgage. 

What are underwater mortgage is is when the balance of your mortgage loan is greater than the fair market value of your home. This often happens when there is a downturn in the market or flat out crash and home prices.

Let's say four example you buy a $300,000 home in 2006, and you still owe $250,000. If you tried to sell your home in the current market you may only get $230,000, leaving you still owing $20,000 and no downpayment on your next home. The advice here is to wait it out. But what happens if your family is growing too fast and waiting isn't a viable option?

Here's what to do:

Getting out of an underwater mortgage will hurt, there's no two ways about it. Prepare yourself to feel a little sting, because it is coming.

1. Short sale

Short sales always hurt because they come up as a little mark on your credit history. Yes you've had a short sale in the past few years, all lenders are awfully hesitant to loan you money. The strategy of hurry up and wait is the one that you may have to take.

2. Take a little from savings

To make up the difference you may have to cash out a retirement fund or use your rainy day money. What's worry some about this is you may have nothing left over, or not enough to keep you afloat if a tragedy were to happen. If you skimmed too much out of your savings and don't have enough for a down payment on your next home, your best bet is to find an experienced loan officers who know where they can get you good deals in Fannie Mae.

3. Rent your home

To meet the needs of your growing family you may have to rent out your home while you find a larger one for yours. This route lets you leave your retirement funds in place, and keeps your credit clean. Renting your home can offset the mortgage payment on the underwater home when applying for financing on a larger home.

4. Renovate your home

Renovating your home will hopefully boost its value.If you renovate the right areas like a new kitchen, bathroom, etc. it hopefully will yield a 5% equity increase! 

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