Your full menu of options

Eight ways out of mortgage trouble, from “catch up and keep the house” to “walk away clean” — with the honest pros and cons of each. A short sale is one tool on this list, not the answer to everything.

We sell short sales for a living, so believe us when we say: a short sale is the right answer only when the better answers don’t fit. Work down this list in order. The options at the top keep your home; the options at the bottom end the mortgage with the least damage possible.

Keep the home

1. Reinstatement — pay the arrears, reset the clock

Pay everything past due (payments, late fees, and any legal costs) in one sum and the loan returns to good standing. Best for: a hardship that’s over — you’re back to work, an insurance claim paid, family can help. Reality check: the number grows monthly, and partial payments usually don’t stop anything. Get a written reinstatement quote from your servicer before wiring a dime.

2. Repayment plan — catch up over months

Your regular payment plus a slice of the arrears each month, typically over 3–12 months. Best for: a short interruption with full income restored. Reality check: your payment goes up during the plan. If the original payment was already a stretch, this only delays the problem.

3. Forbearance — press pause

The servicer agrees to reduced or suspended payments for a set period — for conventional loans, generally granted in increments up to three months at a time and capped around 12 months total. Best for: a temporary, provable hardship with a clear end date (medical recovery, disaster, seasonal income). Reality check: the missed payments don’t disappear — you exit forbearance into a repayment plan, a deferral, or a modification. The generous COVID-era rules are gone; today’s forbearance is standard underwriting, not an entitlement.

4. Loan modification — permanently restructure

The servicer changes the loan itself: arrears folded into the balance, term extended, sometimes the rate adjusted. The main conventional program — the Fannie Mae / Freddie Mac Flex Modification — works through a fixed series of steps (capitalize arrears, adjust rate, extend the term up to 480 months, forbear principal) targeting a 20% cut in your principal-and-interest payment. The Federal Housing Administration (FHA) runs its own permanent menu (partial claims, modifications, and the Payment Supplement, which uses an interest-free FHA claim to buy your monthly payment down for three years). Department of Veterans Affairs (VA) borrowers: the old VASP (Veterans Affairs Servicing Purchase) rescue program ended in May 2025; its successor, the VA partial claim, began accepting cases in June 2026 — plus standard VA modifications and repayment plans. Best for: a permanent income change where you can afford a reduced payment. Reality check: not everyone hits the reduction target, trial payment plans must be completed, and program rules tightened in 2025–2026 (FHA now generally requires 24 months between permanent options). If the modified payment still doesn’t fit your income, a modification just schedules the next default.

Exit the home

5. Sell with equity — the option people forget they have

If your home is worth more than you owe plus selling costs, you don’t need anyone’s permission and you don’t need a short sale — you need a listing agent and a realistic price. After years of appreciation, many struggling homeowners have more equity than they think. Foreclosure legal fees and accrued interest burn that equity monthly, so if selling is the answer, list before the court process eats your proceeds.

6. Refinance — rarely available, worth 10 minutes to check

Replacing the loan requires equity, income, and credit — exactly what mortgage trouble erodes. Best for: homeowners with strong equity who see the problem coming before missing payments. Reality check: once you’re 60+ days late, conventional refinancing is effectively off the table.

7. Short sale — sell for less than you owe, with the lender’s consent

When the home is worth less than the payoff and the hardship is real, the lender can agree to accept the sale proceeds and release the lien. Done right, you walk away without a foreclosure on your record, often with deficiency waived in writing (Chapter 7), sometimes with relocation money, and with materially shorter waits to buy again. The rest of this guide covers qualification (Chapter 4), paperwork (Chapter 5), and process (Chapter 6).

8. Deed in lieu of foreclosure — hand back the keys, on negotiated terms

You voluntarily transfer the property to the lender. Under Fannie Mae’s version (Mortgage Release), a qualifying borrower can get up to $7,500 in relocation assistance and choose a graceful exit — immediate move, three months rent-free, or a 12-month market-rent lease. Best for: when a sale has genuinely failed or isn’t feasible and you need a clean, scheduled exit. Reality check: lenders usually want a documented sale attempt first, junior liens can block it entirely, and get deficiency and tax treatment in writing before signing — the same three questions as a short sale (Chapter 7) apply.

And option zero: doing nothing

Foreclosure is what happens when you don’t choose. It maximizes credit damage (a completed foreclosure means up to a seven-year wait for a conventional loan), forfeits any say in timing, can leave a deficiency judgment behind in many states, and — if there was equity — hands a chunk of it to legal costs. Every option above beats it. That’s the entire reason this guide exists.

How to choose

Two questions sort the whole menu. Can you afford a reasonable payment going forward? If yes, look at options 1–4. If no: is the home worth more than you owe? If yes, sell with equity (5). If no, compare short sale (7) against deed in lieu (8) — and have a specialist run the numbers on both before you decide. Program rules above are current as of August 2026 and change; your loan type (conventional, FHA, VA, or a U.S. Department of Agriculture (USDA) loan) determines which versions apply to you.