Okay, after doing some research, it looks like we may have to walk away. We're in CA, and as far as I recall, they can't come after us. We don't have a second.

I had to scrap our savings for April's mortgage. After that, we're screwed. Our mort co. said they can't offer us anything (at least not now, maybe when we adjust in May). I don't think with the amount of debt we have, we can refi (and do a short refi), and I don't even know if that'd be worth it, because I believe our house is only about $50k less than our loan. So that's almost useless.

I have to run some numbers and weigh our options. However, the next two options are short-sale and foreclosure.

I have a few questions.

-What's the difference of how they affect your credit? (We cant' file BK or at least see no reason to, and will be able to keep our credit cards up-to-date)
-Which is better to do? (to be able to recoup and rebuild for the future)

Thanks. Just trying to make some hard decisions and be more informed. So far, I'm getting a lot of great information from this site.

You may be able to do a short-refi. This is where a lender will give up some of the mortgage balance and let you refi into another loan with another lender. There is a new loan product coming out it is called the DU refi plpus. it allows lenders to lend up to I believe 110% of the value of the home. It is a gov't product. You may want to look into it a bit more.

If the above is not an option I would try and proceed with a short sale. This is my personal opinion.

Finally even though you have not been late and have no more money. I have heard of homeowners staying in their home for months and even up to a year before they are forced out. You may want to consider staying in your home until you are obligated to move out.

But it may be best to seek legal advice however you may choose to proceed.