The basic problem that many people are having right now is that the owe more than the house is worth and it’s unlikely that the value will increase in price anytime soon. If this describes your situation you have to take your current finances into account. First off, make sure you have a monthly written budget so that you know where your money is going. Look at areas where you can cut back easily such as eating out often and entertainment expenses. Prioritize your bills to give your mortgage payment top priority after your basic needs (food, lights, water, etc). If you have high car payments or transportation costs then you may want to look at ways to trim these back as well. You may even need to sell a car if it’s killing your budget. Drastic cuts are needed since increasing income isn’t likely in the current economy. It’s not the most pleasant thing to do but it can really help.

If your monthly house payment is more than 25-30% of your take-home pay you should start looking for an exit strategy. This might be a short sale or even bankruptcy. This isn’t the ideal scenario either but being stuck with an asset that’s become a long term financial liability isn’t the best thing to do for your long term financial health.

The bad news, as best I can tell from the info you provided, is that it probably won’t be possible for you to stay in your home unless you were to dramatically increase your income. You have over 50% of your income going toward housing and that just isn’t sustainable even if you cut other expenses to the bone. You have to get it below about 33% of your take home pay to have a chance at making it work. You’ll have to do this by either getting your take home income up to about $6000 or getting your mortgage adjusted down to around $1000 a month (which would be tough).

If this isn’t going to be possible within about 3 months time you’ll need to consider other alternatives such as a short sale or deed in lieu of foreclosure. You’ll want to negotiate this with your mortgage lender so stay in contact with them and let them know your situation. You want to work on getting into a scenario where you can get out of the mortgage where you can avoid an outright foreclosure as well as avoiding the lender trying to come back and get the difference between what the house ultimately sells for and the value of the mortgage.

If you need help, contact a HUD approved housing counselor in your area who is willing and able to help you and who has knowledge of laws that apply in your state. Avoid getting caught up in any refinance scams because there are a lot of them out there today. I also recommend checking out what Dave Ramsey has to say about real estate and other financial matters. His advice has been very helpful to me.