If you used an interest-only or so-called "option" mortgage to stretch into an unaffordable house in the last year or two, you could be facing some dark times.

Those loans were designed for helping people get into houses with the smallest amount of initial cash flow. As mortgage rates continue to rise and those creative mortgages move past their introductory teaser rates, the monthly payments on those mortgages are moving up fast. In the late 1980s and early 1990s, housing markets as diverse as Houston and Boston saw homeowners trapped in houses they couldn't afford to carry -- or to sell. In oil-based Houston in particular, some homeowners simply walked away from their houses and mortgage obligations, losing their homes and their clean credit reports in the process.

Don't panic just yet if you're one of those consumers. Stockpile cash. If you don't have a rainy day fund, get one. If your mortgage payments stretch your monthly budget now, and you've got no emergency savings, you are very vulnerable. If you have those savings, you have room to maneuver and negotiate.

Refinance. Make your mortgage payments no matter what. If you have an option mortgage that allows you to move to a lower payment for a while, do that if it's the only way to keep your payments current. The consumer credit counseling industry has been training their experts for just these situations. If you really can't afford to stay in your house, sell it and move on.

By M. Sese
http://realestatepress.org