You were able to live in a nice house for 3 years, albeit an expensive “rent.” You were able to send your daughter to a good school and get an education. Planning on interest rates not changing, planning on real estate continuing to increase was overly optimistic and very unrealistic.
The contract provides if you can’t make payments, to give them the keys. If I were in your position, I would walk. Once the rate resets, you may have no other option but to walk. This market will get worse before it gets better. You would have to hold on for more than a few years to sell at a profit. Short sales, as said, take time and you will have to continue to make high “rent” payments in your home.
Walking seems like the only reasonable financial decision to make. As someone already said on this site, stay as long as you can, put away what you’d pay every month and in the interim find a place to rent.
From what I’ve read, it will be on your credit report. The question is for how long.
It could be much worse. You could’ve put 20% down and lost the equity, plus your monthly payments (high rent) for 3 years.
