Advice needed for home where value has dropped 60%?

[NotWorthAsking]

Looking for advice on what we should do...we are able to make our payments each month, but the decrease in value means keeping our mortgage appears to be a bad plan, versus getting out of it and just renting for a few years and saving the difference of over $1,000 a month while renting...

Purchased home in Dec 2006 for $334,000.
Current appraisal (from our county) is $130,000.
We have $10k paid in principal, so the value to loan amount ratio is 249%.
Lender is Wells Fargo, and our loan is FHA insured.
Interest rate is fixed (6.5%)

The loan is extremely upside down; but we don't qualify for any government programs (because we can afford our current payments, and the value to debt ratio is so high). We're not sure how much difference (if any) we'll be able to make by applying for a modification and are thinking about going straight to Short Sale or foreclosure.

If anyone has expertise/experience with this sort of situation, we are interested to hear your thoughts on how to proceed.

Thanks!

[Evan Bedard]

Hi notworthasking,

Hmm this one is completely up to you since you are able to afford your monthly payments a modification may be very difficult to achieve and a principle reduction right now seems almost impossible. But a modification is not impossible and may still be worth a try.

If you decide a short sale is the best route to take remember that most lenders will require the house to be on the market for at leat 90 days before they will consider it..

[trappedincali]

I am in an identical position. Able to afford my payments and 65% underwater. It was simply a business decision on our end. There was no incentive to continue to pay on our property.

Best case scenario is that our house would regain it's value in 10 years (HIGHLY unlikely with all the new homes outselling ours for years to come). Even if we rode it out, we would still be simply breaking even in the end if we waited until the value met our mortgage balance. The thousands we are spending on keeping this ship afloat can be put to better use as savings, or paying down existing debt. I'm sure I can get a modification, but for what? It a temporary fix as far as I'm concerned. If we we're really attached to our house, I would see it as an option, but we're not.

Worse case scenario is that it would take 20+ years to get back that 65% and we would have spent a good percentage of our life and income on a BAD investment. No thanks.

If we walked, it should take 5 years or less to recover from this and that beats BOTH of those scenarios.

I believed it was time to cut our losses and move on, and we have.

-Lee