Posted on: 26th Nov, 2007 07:23 pm
Hello everyone-
I have a bit of a dilema...We have been in our house for almost a year and we just found out tonight that we owe more than the house is worth. We wanted to sell it so we could move to a a better community but now we don't know what to do. We have some late pays on our mortgage because we encounted a family emergency back in July so we've been on a repayment plan since then. The first mortgage will be caught up by January and the 2nd mortgage will be caught up in December. The realtor we met with said he has relationships with builders so we could trade up and buy a larger home and he would buy our home for market value and we could roll the "deficiency" over into new home as long as it had equity. Is this a smart thing to do? Also how hard will it be for us to obtain financing since we have late pays showing up. In September 2008 our bankruptcy will be discharged for 2 years so I was thinking we might have a shot with a FHA loan but not sure how the late pays will affect that. Please help me....We really want to get out of this house because the community is going down the drain quickly and we want to sell before the house loses more value...confused here....
I have a bit of a dilema...We have been in our house for almost a year and we just found out tonight that we owe more than the house is worth. We wanted to sell it so we could move to a a better community but now we don't know what to do. We have some late pays on our mortgage because we encounted a family emergency back in July so we've been on a repayment plan since then. The first mortgage will be caught up by January and the 2nd mortgage will be caught up in December. The realtor we met with said he has relationships with builders so we could trade up and buy a larger home and he would buy our home for market value and we could roll the "deficiency" over into new home as long as it had equity. Is this a smart thing to do? Also how hard will it be for us to obtain financing since we have late pays showing up. In September 2008 our bankruptcy will be discharged for 2 years so I was thinking we might have a shot with a FHA loan but not sure how the late pays will affect that. Please help me....We really want to get out of this house because the community is going down the drain quickly and we want to sell before the house loses more value...confused here....
if the realtor is helping you to sell the house, that is good. you can try it out. otherwise, you can think about short sale or deed in lieu of foreclosure.
Hello,
Are you planning to do a short sale on your present home and adjust the outstanding balance with the mortgage of the new house?
Which bankruptcy did you file? In case of bankruptcy Ch 13, you have to wait for a year after bankruptcy discharge to qualify for a FHA mortgage and they require a minimum of 12 months of on time payments. For Ch 7, it is 2 years from the date of discharge.
Are you planning to do a short sale on your present home and adjust the outstanding balance with the mortgage of the new house?
Which bankruptcy did you file? In case of bankruptcy Ch 13, you have to wait for a year after bankruptcy discharge to qualify for a FHA mortgage and they require a minimum of 12 months of on time payments. For Ch 7, it is 2 years from the date of discharge.
I posted under teddybear last night but now I have joined so I'm here to respond to the questions above. I filed a Ch. 7 bankruptcy and it was discharged September 2006. I think the realtor was explaining that I could adjust the outstanding balance with the mortgage on the new house as long as the new house has equity already. Do you think this is a good choice? So are you saying if I wait until Sept. 2008 I can get a FHA loan even with the late pays on the mortgage? Please help, I'm all confused now....
I doubt the realtor will do you any favors by giving you a bigger loan on a new bigger home. Even if all that he said he can do it still doesnt sound like a great plan. And then there is an issue of financing. Even if you buy a home with equity in it a bank looks at purchase price as value so its a moot point about rolling in deficiency ballance. Also any FHA underwriter will look at your file see a BK 2 yrs ago and morgage lates and then even if you do get approved it will be a hell to get done and there will be no guarantees. And getting mortgage elswhere (subprime) you looking at 10%+ rates and getting downpayment. By the way if you buying your new home at cost where you getting 3% downpayment + 4-5% cloing costs and escrow + deficiency balance?
Personal opinion:
Looking at this situation it seems that we have a construction company desperate to sell a home that works with a realtor that is looking to make a commision.
We also have a client (you) desperate to get out of the neighbourhood they live in and to get a better home.
This is a bad combo.
You are not ready. You are not 2 years out of the BK and you have lates on your mortgage within last year. That shows 2 things: you overextended and you have no reserves. This is not to get on your case but think about this. With current home you can afford it but you live paycheck to paycheck because as soon as something major happens you dont have money to pay the mortgage.
Now you planning to sell your house under value and lose money on it and buy a bigger more expencive home at what is likely not the best time in your financial history.
And all of this is a big maybee in the first place because there are no guarantees you will be able to get financing in the first place.
My suggestion is to wait. You almost caught up with your mortgage so your payments will be affordable and you can continue to live there while you rebuild credit and save up some money. When you have 12 month of clean credit and some money to put down (id shoot for 5% at least) and you have been 2+ years out of BK you will be in much better position to get a mortgage that is affordable. Also mortgages should turn around within next 2 years so who knows you might not need to deal with the deficiency after all.
Personal opinion:
Looking at this situation it seems that we have a construction company desperate to sell a home that works with a realtor that is looking to make a commision.
We also have a client (you) desperate to get out of the neighbourhood they live in and to get a better home.
This is a bad combo.
You are not ready. You are not 2 years out of the BK and you have lates on your mortgage within last year. That shows 2 things: you overextended and you have no reserves. This is not to get on your case but think about this. With current home you can afford it but you live paycheck to paycheck because as soon as something major happens you dont have money to pay the mortgage.
Now you planning to sell your house under value and lose money on it and buy a bigger more expencive home at what is likely not the best time in your financial history.
And all of this is a big maybee in the first place because there are no guarantees you will be able to get financing in the first place.
My suggestion is to wait. You almost caught up with your mortgage so your payments will be affordable and you can continue to live there while you rebuild credit and save up some money. When you have 12 month of clean credit and some money to put down (id shoot for 5% at least) and you have been 2+ years out of BK you will be in much better position to get a mortgage that is affordable. Also mortgages should turn around within next 2 years so who knows you might not need to deal with the deficiency after all.
Thanks for that reply evolvik. I needed to hear that. I wasn't thinking about it that way. So if I make 12 months of on time mortgage payments that should help me this time next year? I guess I'll have to tough it out. The neighborhood became undesirable almost over night because people that can't sell are starting to rent out their homes. But I don't want to make a mistake so I'll tough it out. What are my chances after a year??
If you have clean credti for 12 mon and 2+ years out of BK you can go for a FHA mortgage, with 600+ scores you eligible for automatic approval so long as your income is on par. FHA allows you 97% purchase at a rate close to conforming without looking at your score or history past 12 mon ago. Even at 500 score you still eligible but it must be manually underwriten. So in 12 mon you can get a nice home and good interest rate on a 30 yr fixed mortgage. Meanwhile keep on top of credit and get some money in your savings account. There will be more good deals so make sure you are in the best position to get them. Dont gamble with your home.
Okay so I made my payment with Countrywide yesterday and they informed me that the 2nd mortgage is caught up but that we are still 3months behind on the 1st mortgage. I just do not know what to do. I feel like just letting the house go and rent an apartment or something. I feel like we are just working to pay bills. Please help... Should I ask them for a Deed in Lieu? How hard would it be for us to get that? We're 3 months behind and I just feel like we're paying all this money for nothing. We're also starting to find a lot of construction defects which I think will make it hard to sell. Any suggestions?
hello sloanfam,
i think you should talk to your lender immediately and see if he is willing to work out any alternative repayment option. as you are already 3 months behind on the first mortgage, your lender might send a foreclosure notice any time.
lenders generally don't want to accept a deed in lieu of foreclosure if there is a second mortgage on the property but you may give it a try.
i think you should talk to your lender immediately and see if he is willing to work out any alternative repayment option. as you are already 3 months behind on the first mortgage, your lender might send a foreclosure notice any time.
lenders generally don't want to accept a deed in lieu of foreclosure if there is a second mortgage on the property but you may give it a try.
One option would be a short sale. This is where the lender accepts a payoff that is lower than actually owed. They will only consider this when the you have a buyer that is willing to pay market value for the home. This way, you wont have a foreclosure on your record. A deed in leiu of foreclosure could be another option. Please call your lender to discuss these and other options that they may have available to you.
So you owe more than your home is worth. Ummm, everybody does, when they have a mortgage.
The thing is, you have not owned the property long enough to realize any profit, anyway there are more factors than just property value to consider.
*There is the cost of your money (interest rate you pay now vs. what you would have to pay with "mortgage lates" after a bk),
*Lender Fees, such as points, prepaids, loan origination
*the cost to sell (5 to 7%, depending on RE commissions. the lender will recoup this from you one way or another)
*The expense of moving.
Tell me, is this newer! bigger! better! home located in the same town you already live in? Is it in America?
As a realtor, I must say, if your neighborhood is declining, your ENTIRE region is declining to some degree. If real estate is losing money in your market, why would you want to invest more in it?
There are no US markets that are really seeing a rise is property values
Things are tough all over. Buck up. Don't borrow from Peter to pay Paul.
You realize that your payment would definitely increase? Alot. You have no reserves. No safety net. You are very lucky to have acquired a loan when you did. Lenders are not rubber stamping everything like they were.
Real Property is not a liquid investment, you must think LONG TERM.
If you can save your investment, do.
In A FEW YEARS, when property values go back up (as they always do!), you will then have some equity to buy your next home, and your credit will be more solid from making your payment on time.
The thing is, you have not owned the property long enough to realize any profit, anyway there are more factors than just property value to consider.
*There is the cost of your money (interest rate you pay now vs. what you would have to pay with "mortgage lates" after a bk),
*Lender Fees, such as points, prepaids, loan origination
*the cost to sell (5 to 7%, depending on RE commissions. the lender will recoup this from you one way or another)
*The expense of moving.
Tell me, is this newer! bigger! better! home located in the same town you already live in? Is it in America?
As a realtor, I must say, if your neighborhood is declining, your ENTIRE region is declining to some degree. If real estate is losing money in your market, why would you want to invest more in it?
There are no US markets that are really seeing a rise is property values
Things are tough all over. Buck up. Don't borrow from Peter to pay Paul.
You realize that your payment would definitely increase? Alot. You have no reserves. No safety net. You are very lucky to have acquired a loan when you did. Lenders are not rubber stamping everything like they were.
Real Property is not a liquid investment, you must think LONG TERM.
If you can save your investment, do.
In A FEW YEARS, when property values go back up (as they always do!), you will then have some equity to buy your next home, and your credit will be more solid from making your payment on time.
Hi Sloanfam,
I have just read this post and sorry to hear about your unfortunate situation. Do not feel bad this has happened to many people this pass year. If it is a struggle to keep up with payments it would be better to do a short sale. This would allow you to get out from underneath the house and begin to rebuild your credit.
If you would like to keep the house then you need to talk to your lender about combining both loans into one loan. Although many people are not aware of it lenders are willing to do this. Also, are you on an ARM because if you are there are ways to talk to your lender about putting you on a fixed rate?
I have just read this post and sorry to hear about your unfortunate situation. Do not feel bad this has happened to many people this pass year. If it is a struggle to keep up with payments it would be better to do a short sale. This would allow you to get out from underneath the house and begin to rebuild your credit.
If you would like to keep the house then you need to talk to your lender about combining both loans into one loan. Although many people are not aware of it lenders are willing to do this. Also, are you on an ARM because if you are there are ways to talk to your lender about putting you on a fixed rate?
