What does it mean to be underwater on a mortgage?

Being underwater means, as a homeowner, you owe more on your mortgage than the house is worth. With the current economic issues, they (CNN Money) say one out of five homeowners are in this situation.

I think this may also be called Negative Equity.

If you think you may be underwater, there are a few options to consider...

First, if you aren't planning on moving for a while - like 5+ years - don't worry too much. You are rebuilding your equity with every payment and they say home prices will eventually rebound.

You could also think about refinancing. The government's new mortgage-relief program let's people that owe up to 105% of their home's value to get a loan (just as long as the current one is held by Freddie Mac of Fannie Mae and they prove they can afford the payments).

If you're having trouble making payments, you may be able to get your loan restructured. Or, as a last resort, there's a short sale. That's when your lender let's you sell the house for less than you owe. This, though, could really drop your credit score by as much as 200 points. That could hurt your chances of getting another loan at terms your can afford.