Traditionally, the real estate market has been known to be like ketchup. The end result can be tasty [assuming you like ketchup], but the process of getting there is not particularly fast. Anticipation and staying power has always been the key. Of course, all of this went out the window in this decade. Instead of a steady market, we saw conditions the resembled the stock price of Google after it started being traded. Prices, appreciation rates and home sales were all at historic highs for five years or so.

If you purchased a home in the last few years, you may be an unlucky soul. The natural cycle of the real estate market has produced a slow down. Prices have pulled back, sales are very slow and appreciation is non-existent. For many people, this three fold development has resulted in a bad situation. Specifically, you can know longer afford your home. Perhaps interest rates have risen and your monthly payment is now beyond your means. Alternatively, you may have a milestone date coming up on your loan and you simply can't get the money together since you can't sell or refinance. Whatever the problem, the key point is you have one. So, what are your options?

First and foremost, it is important to understand lenders do not want you house. Second, lenders fully realize a bunch of people are in trouble. In San Diego alone, they are forecasting foreclosure rates as high as ten percent. In practical terms, this means you should not feel like you are the only one in bad shape.

If you are having problems, the first step is to contact the lender. Hiding from the problem is not going to achieve anything. When you stop making payments, the lender is going to be all over you. Do something! If you contact the lender, you will be presented with some options. The first step nearly all lenders take is to offer forbearance. Much like student loans, they give you a period of relief where you do not have to pay or the payment amount is reduced. Why? They don't want the house! They want you to get through the rough times and keep paying.

At some point, however, you may realize you are never going to get out from the loan. Don't let it go into foreclosure. A better approach is to try to give the home back to the lender. Most will try to keep peddling the forbearance idea, but you do not have to take it. Eventually, they will agree to take the home back because it saves them the cost of going through foreclosure.

So, why would you want to give them the home instead of going through foreclosure? Well, some lenders are lazy. They are in the business of writing loans, not foreclosure. If you give the home back to them, they often close the file without pummeling your credit report. This happens less than half the time, but it is still worth taking a shot on. If you can get rid of the home without a mark on your credit report, you are free and clear for the most part.

If you are upside down on your home, don't panic. You are not alone. Try to find a solution with your lender that you can live with. The worst thing you can do is to do nothing at all.