Underwater Mortgage

This is bad. Underwater is only good when you're a fish.

You bought that lovely 4-bedroom, 3-bath for $470,000, with $70,000 down in a big, fat, bull housing market. But unfortunately, the good times didn't last...and now Zillow says your home is worth $380,000. And...you just got fired. You need to move.

After $20,000 in commissions and closing costs, your home sale will net $360,000. And that's a problem, because you have $400,000 in loans on it. In essence, you'll have to write a check for $40,000 to the bank to get out from under the mortgage because it's so underwater.

The water line? The amount of mortgage you have on the place. And really, to be fair, then subtracting the commission to the broker who'll sell the home plus closing costs. Bad place to be.

If it ever happens to you, you'll have 7 years of penalty box time, wherein a normal lender simply won't lend money to you. If you qualify for an FHA loan, it's a 3-year penalty box, and you'll still have to get PMI (Private Mortgage Insurance), even if you put more than 20% down.

See: Short Sale.