How old are you? If you’re in your 20’s I’d say this is a good learning experience which hopefully you can recover from in a decade or so, hang in there.
Part of the housing bubble is defined by the fact that income has not kept pace with housing.
How much, if any, equity do you have in the home? The way I see it, your choices are (in order of my own preference):
1. walk away and let it foreclose. this is assuming you don’t have much equity. you will take a hit on your credit report but in the future many companies who review your credit may be very forgiving to people in your situation if you had otherwise good credit except for this foreclosure thing. you may have to pay “forgiven debt” tax but there are talks of repealing this tax law as well, maybe in January.
2. refinance into a fixed-rate loan. You can do better than 8.75% (assuming good credit).
That’s about all I can think of for your choices… Now grab some lube and prepare to be reamed by other posters.
