Owe too much on our home

[concerned]

My husband and I recently built a new home (approx. 1 year ago). The building process did not go as we planned and the cost, along with the taxes, ended up being much more than we anticipated. The financial stress we have recently encountered has caused problems in our marriage. We recently put our home on the market. We are concerned that our home will not sell for what we owe. We did a home equity shortly after we built to finish up our lawn and consolidate some bills that now brings are debt/value ratio to 100%. We live in a rural area and we are less than optimistic that we will be able to sell our home and get out from under our debt.

My husband consulted an attorney for advice. We were consulting him anyway to look into a partial lien release for a portion of land that we have to sell off and perhaps help us out financially. We have excellent credit despite our recent financial troubles. We pay our bills on time and only have a few thousand on credit cards. We are currently both employed and earning decent incomes. Our credit scores (I think) are in the low 700's. The attorney said that bankruptcy & forclosure should be avoided. He suggested we explore removing pmi to help out and possibly a deed in lieu.

Here are our questions:

Will the deed in lieu affect our chance of owning a home again?
How long will we have to wait before we can get another home?
Will we even qualify for the deed in lieu?
Would we qualify for bankruptcy (if this was our only option)?

Any advice is greatly appreciated. We are struggling, but we are surviving. We are just finding that owning a home is not all we thought it would be. We are tired of feeling strapped and we are frustrated because if we had never bought our home, we wouldn't be in this position!

Thank you,

Concerned

[concerned]

one more question

What are the specific qualifications for Ch. 7? Ch. 13?

[HomeSellerVA]

I am in a similar situation where I recently bought a house from a builder financial problems forced me to put it in the market. I too am curious about a deed in lieu of foreclosure. Did the attorney suggest approaching your mortgage company about getting the deed in lieu?

[concerned]

Yes, our attorney suggested we submit the mortgage company a letter requesting the deed in lieu, which he said he would submit for us. Of course, this was suggested strictly as a last resort.

[HomeSellerVA]

Did your attorney say whether it was likely to be accepted by the mortgage company? Have you found out anything about the effect of your credit a deed in lieu would have?

[concerned]

It sounds like it will still affect our credit, but not nearly as bad as a foreclosure. He said in most circumstance mortgage companies will accept a deed in lieu because the cost to them if you foreclose is much higher.

[EdytaHome]

You may also try to sell the house on a short sale. This will mean that after the sale is complete you'll have negative equity associated with the house. If you prove your hardship to the mortgage company they will most likely forgive you the negative. This will go on your credit report but it's not as bad as a forclosure and a bankruptcy.