Q: I am at my wit’s end. My adjustable rate mortgage (ARM) has reset and my mortgage has increased by $400. I also have a second mortgage and am unable to pay what I owe on my student loans each month.

I know I need to sell my home, but I also need to put floors down before I sell it. I had the carpet removed shortly after buying the house and want to place down laminate floors on top of the plywood. Here’s the problem: After I put in the floors, I don’t think I can get what I paid for the house. Right now, I am current on my first and second mortgage, but I am running low on money. I am a medical professional, but I’m a single parent and there is not enough money go around. What exactly is a short sale? Do they work? How about a deed in lieu of foreclosure? How hard will that hit my credit and for how long? Can I ask the lenders to readjust the loan? I hope you have answers for me.

A: You’re in a difficult situation, and I’m not sure how much help is out there for you.

First, you may have heard about the interest reset relief program that is starting up as of January 1, 2008. You must be current on your mortgage (which you are) and you must have less than 3 percent equity in your property (which it sounds like you might have). However, you must have a loan that will have an interest rate reset starting January 1, 2008. Because your loan has already reset, it’s possible you won’t qualify for this.

Still, it’s worth a shot, but you’ll have to do the work. Call the Federal Government’s toll-free mortgage crisis help line at (888) 995-HOPE to see if you qualify for assistance.

If not, then you have to figure out next steps. Can you find a way to either bring in more cash (can you rent out a bedroom in your house?) or reduce expenses until you get through this crisis?

I’d hate to see you do a short sale (where you sell the home for less than the loan amount), or a foreclosure (which will stay on your credit history for up to 7 years), or even a deed-in-lieu of foreclosure (where the bank accepts the deed in lieu of you paying off the loan).

You’d be better off trying to trim your expenses or bring in extra income to put down the flooring you need and wait out the current mortgage crisis. Staying in your home will be the least costly choice, both in terms of cash and your credit. I hope you can find a way to make it happen.

No matter what, please talk to a housing counselor at the Department of Housing and Urban Development. You may qualify to refinance your mortgage at a lower rate through the new FHA Secure plan. Go online to www.hud.gov/fhasecure.cfm to get contact information or call toll-free (800) CALL-FHA for more information.