Currently my partner and I are living in a house in the historic district of FQ Story in Phoenix, AZ. We purchased this house in 4/2007 at the peak of the "balloon" for $295,000 with a down payment of $60,000. We currently owe ~$233,000 in principal with 6.125%. This house is a fixer upper, we have gutted the guest house, some to the main exterior and none to main interior. As of right now I don't think this house could list for more than $200,000 given the foreclosure sale next door for $190,000 a year ago. We have both suffered pay reductions but our combined income prevents a mortgage adjustment. What should we do know in what order least financial damage???
a. Should we stay in the house and fix it up? Then do an interest only loan, To hope to sell it to at least break even and have a down payment for another home? then how much should we spend in repairs/upgrades?
b. Should we put it on the market to short sale and go rent until our finances recover IF it finally sells?
c. Foreclose and walk away then rent for 7 years?
d. Beg a family member to pocket-short sale it to and rent from them until we can buy it back from them once our finances recover?
Let me know what you all think,
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