Even before 1 and 2, call your lender. Your lender may/will most likely have conditions that will need to be met in order for them to accept a short sale. You may not be able to just list it now and poof get an offer and sell the home short. Most lenders (in the past) would not accept a short sale unless the home had been on the market for a few months and you were already in default. However as the market has deteriorated they may sing a different tune.
How your credit will be affected with respect to selling your home short verses a total foreclosure where you walk away totally is something that I cannot answer. That would be best answered by a credit counselor and/or your lender.
Let me say this again… CALL YOUR LENDER…Let the know the deal and then move in whatever direction you decide to move in. Even if you do sell it short, you can do so without paying any more monthly payments. You will go into default and again, I AM NOT ADVISING YOU IN ANY MANNER. Just pointing out options. I do not disagree that paying into a depreciating asset makes no sense. Everyone loves to crow about that but the ramifications of doing that are something I personally have little experience with.
Contraman posted recently that he saw an example of getting your credit repaired in a few years is possible. Again the extent to the credit damage of a foreclosure verses a short sale is something you need to find out about… Call your lender.
