Should growing family walk away from under-water rowhouse

DEAR HARRY: We are in our late 20s with a growing family . . . one here and two in the oven. Our present rowhouse is going to be too small before spring. The problem is that the house is "under water" with a remaining mortgage of $96,000 and a value of about $80,000.

We have two concerns: We don't want a blemish on our credit if we make a deal with the mortgage company to sell it for less than the mortgage and have them absorb the loss. We also don't want to pay the mortgage down to the home's value. Doing this will deplete our savings, but we can manage it. Is there another way for us to consider?

WHAT HARRY SAYS: You could rent the house. This would make you a landlord with all of its troubles and potential rewards. It will also delay the day of reckoning. And if you have a vacancy, you could be severely hurt. Your lender will undoubtedly not accept a short sale (taking less than its balance due), because you're not in dire financial straits. You could also hold on and wait for further improvements in the real-estate market. This means cramped quarters for the family and a higher value for any new home you buy. My vote is to sell it now and eat your loss. Your credit will not be hurt, and you'll be in more comfortable living quarters.

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