Short sale vs foreclosure

[AlohaStyle]

I agree with Eric but can't expand further. A short sale I believe is a better route to go if you can get the bank to agree to it, but it will still hurt your credit. I would simply talk to your lender and see what options you have. Talking to my mortgage broker who is a family friend, he said it's hard to get lenders to do anything unless you are already behind in payments. Obviously there can be exceptions, but I personally was told I'm screwed with my mortgage.

Doing quick google pulls up this older, but basic info:

While a short sale will save you from foreclosure, it will also have a negative effect on your credit score, frequently lowering it by as much as 200 points. This can be overcome more quickly than the black mark of a foreclosure, especially if you manage to retain one or two credit cards and keep them current. Perhaps equally distressing, the Internal Revenue Service frequently deemed the difference between the mortgage balance and the amount realized from the short sale to be taxable as income despite the fact that the debtor never saw a dime of it. There is new federal legislation called the Mortgage Forgiveness Debt Relief Act 0f 2007 that just went into effect on January 1st, 2008. The new act essentially eliminates this problem.

This is also a quick snapshot of pros/cons:
http://homebuying.about.com/od/forec...oreclosure.htm