What If I Owe More Than My House Is Worth?

Being underwater means your loan payoffs add up to more than a buyer will pay. At a sale, the title company has to pay off every mortgage and lien before the deed records, so the difference has to come from somewhere.

Get the Real Payoff First

Ask each lender for a written payoff good through a likely closing date, including any second mortgage or home equity line. Compare that with a written offer or a realistic list price after commissions and repairs. Sometimes the gap is smaller than the number in your head.

Your Main Options

• Bring money to closing to cover the shortfall.
• Short sale. The lender agrees to accept less than the payoff. Expect a hardship letter, financial documents and lender review of the buyer's offer. The CFPB explains short sales.
• Modification or forbearance if you want to keep the house.
• Rent it out if the rent covers the payment while values move.
• Deed in lieu of foreclosure, where the lender takes the deed instead of foreclosing.

The Leftover Balance and Taxes

Ask in writing whether the lender waives any remaining balance or keeps the right to collect it. If debt is canceled, you may get a Form 1099-C, and canceled debt can count as income. IRS Publication 4681 covers the rules and exclusions. Bring it to your tax preparer.

Free Help

HUD-approved housing counselors offer free or low-cost help with budgets and foreclosure options. Find one near St. Louis through the CFPB counselor search.

Where a Cash Buyer Fits

If your lender approves a short sale, we can be the buyer and close as-is at a title company. If the payoff turns out lower than you feared, see how cash offers are calculated.

Common Questions

Can I sell my house if I owe more than it is worth?

Yes, if you cover the shortfall at closing or your lender approves a short sale for less than the payoff.

Will my lender approve a short sale to a cash buyer?

The lender decides. It reviews the offer, your hardship and your finances, and it can say no or counter.