In layman's terms, this means that you owe more than what your house is worth. If you want a quick valuation of your home, go to www.zillow.com. It's free! If you have equity in your home, meaning you have my value than debt on the house, then you have equity--and your home is not under-water.
How Many Loans Do You Have Against Your Home?
Typical loans against your residence are a first, a second and a third mortgage (usually a home-equity line of credit). The more loans you have, the more issues you need to deal with, e.g., deficiency judgments (from lenders two and/or three) and taxation issues by Uncle Sam.
Determine Your Unique Financial Situation.
Determining your unique financial situation is many times difficult, but vitally important in determining the various options available to you (and not available to you). For instance, a person who has no income has little chance of receiving a loan modification from their lender whereas a person with some income may have the option of either doing a loan-modification, a short-sale or foreclosure. And while filing a Chapter 13 might sound like a good idea--it's not always the best solution for an individual--if, for instance, they are unemployed and have no money to pay their mortgage--even a modified payment. And add to the mix--understanding how bankruptcy laws can and cannot help your unique financial situation.
What State Do you Live In?
Depending on what state you live in, foreclosure can take a long-time to complete (judicial states) or take just a matter of a few months (non-judicial states). So, if you live in California, it is vitally important to know that your foreclosure process can be as short as 4 months--from start to finish!
The goal of this guide was not to address all issues and concerns in connection with walking away from your home, but rather, to start the process of opening up a healthy dialogue on this issue and to help you realize that no two situations are the same--even if they look identical from the outside looking in.
Below is a list of links to helpful resources. If you do nothing but one thing, at least consider purchasing a good and current book on the subject. Nolo sells a great book called the "Foreclosure Survival Guide." It answers all the questions you might have (and not know you might have) on the subject, including answering questions about deficiency judgments and taxation issues--two issues most people don't understand until it's too late. It sells for about $24.99. It's well worth it. The link below is a direct like to the book. In sum, make an INFORMED decision before taking that big step!
Hoped this helped.
Additional resources provided by the author
As you can see, there are many questions you need to ask yourself before you take that next step. Here are are website to help you along the way in making this difficult decision:
1. Nolo--to purchase "Foreclosure Survival Guide: An easy-to-read book that answers all your questions regarding the pros and cons of foreclosing on your home.
2. HUD--to speak to a HUD-approved counsel for free about your situation.
2. NACA--to locate a consumer attorney in your area--specializing in foreclosure, loan modifications, etc.