If you have a mortgage that you cannot afford to pay on, you have two choices.

One choice is to talk to the lender and see if they can lower your payments. Typically you will ask if they can lower the interest rate so you can afford the lower payment. This is called a loan modification.

A loan modification works for you if together with all your other payments each month, you are spending no more than half your income. This is known as a debt to income ratio. And if you are spending more than half on monthly payments, even after the loan modification, it won't be approved by the lender most likely and isn't a good option.

Also, if you owe more than your house is worth, you may not want a loan modification. You may ask yourself, why am I spending more on a monthly payment than I have to? I could walkaway from my mortgage and buy the house next door and pay far less?

So in those cases, a mortgage short sale may be better. In a mortgage short sale, you sell the house for less than the mortgages on it. If there are two mortgages, each lender gets paid back only part of what is owed. They will let the house be sold and then perhaps release you from further debt. Or they may ask that you repay some of their loss. Either way you will be better off.

A mortgage short sale is reported as "paid - settled" on your credit report, most of the time. It does not count against you the way a foreclosure does. And you can negotiate with the lender which you cannot do in a foreclosure.

Mortgage short sales are tricky and you should get someone to help you with the negotiation. A real estate agent can sell your property but you may want to get a short sale specialist to help you negotiate with the lender. The negotiations include:

• Approving the short sale so the lender says "okay" quickly and you don't lose your buyer
• How the lender reports your credit
• How the lender releases you from liability

See walking away from your mortgage for more information.  And also see should you stop making your mortgage payments. And how to sell your house fast.

And please watch my video on how to avoid foreclosure by doing a short sale even if you have a second mortgage foreclosure situation. The answers are here. I will never share your name or email with anyone.

And watch this video on short sales and foreclosures. This is a screen shot — just type in your email and I'll get you to the real video. Thank you.