When you are having trouble paying your mortgage, you have several options.  You can use the property as a rental and buy a second cheaper home to live in, do a short sale, go into foreclosure, or do a bank walk away.  There are pros and cons to each option and each impacts your credit differently.

I have seen families rent out their homes and purchase or rent a cheaper house until they catch up financially.  This is a viable option as long as you find a good tenant that pays on time every month and does a good job maintaining the property.  A con is that if the home needs a lot of repairs over the next year it could be costly.  In this situation, your credit has no negative impact unless you slow pay on your mortgage due to slow paying tenants.  Remember that if you cannot find tenants, you still have to continue to pay your mortgage, HOA fees, taxes, and insurance.  If you purchase a smaller home, now you owe two of everything!

If you sell your house for more than you owe on it and you aren’t paying the difference, you are doing a short sale.  This shows slow pay on your credit, but at least you can buy another house in a few years which is a better outcome than having a foreclosure on your credit.

The only good thing about a bank walk away is that you no longer owe on a mortgage.  As for your credit, it’s just like a bankruptcy.  As far as your credit rating is concerned, a deed in lieu and a bank walk away damage your credit equally according to FICO.  Bad credit can damage any security clearance you have.

These are some things to think about when you cannot afford your mortgage.  You should always consult with as many professionals as you can to determine which route is better for you.  If you would like to talk with a Realtor who can help you through a short sale, give RREA a call today to speak to one of our Realtors.

A native of Columbus, Georgia, and a graduate of the University of Georgia, Shannon has lived in the Houston area since 2004. She holds over nine real estate Certifications and Designations. Shannon is the host of "Houston Real Estate Radio" on am700 KSEV in Houston.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>