Financing in 55129>Question Details

Ty, Both Buyer and Seller in Minneapolis, MN

What are my options?

Asked by Ty, Minneapolis, MN Sun Jun 20, 2010

My wife and I purchased a townhome in 2006, since than we have had a child and are expecting another one in October. We can easily afford our mortgage payments and have great credit scores (750 ). We would like to purchase a new home that would plan to live in for 20 years. We owe $150,000 on our first mortgage and another $26,000 on a second for our townhome. Similar homes in our neighborhood are selling for $140,000 or so. We do not what to short sale our house and reluctantly are willing to pay the difference between the sale price and the amount we owe. Are their any programs that would allow us to finance the loss of our first house into the purchase price of our next house. I feel as though I am throwing money away on our house as prices continue to fall. Are their any options for us?

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In answer to your question, no, there are no mortgage programs available where you can finance the loss on the first house and the purchase of your next home.

If you do not want to do a short sale but still want to move, then your only other option would be to rent it out or keep it as a second home. If you rent it out, you will not be able to use the rental income to qualify for the next mortgage. You must be able to carry both mortgages and stay within the debt-to-income ratios on your next mortgage.
1 vote Thank Flag Link Mon Jun 21, 2010
If you have a big enough income. Buy another house and rent this one out. That way you have some income from rent to help pay this off. AND you get the house you want to live in.

I would check to see how much rent you can get for this house and how much of the payment it would cover. The advantage of renting is in time the house will be paid off, at least partially by a renter. The disadvantage is the rent may be to low for your expenses and you have to deal with a renter and still manage the maintenance of the house.
1 vote Thank Flag Link Sun Jun 20, 2010
Can you rent it out? You can not sell it as a short sale and maintain a good enough credit score to buy a new home. You may want to consider staying where you are. We had two children in a 1000 square foot apartment with two bedrooms until the oldest was 7. They both turned out just fine.
0 votes Thank Flag Link Fri Oct 1, 2010
Boy, Ty, that is a tough nut to crack. I have talked with sellers/buyers who are in the same situation you're in. I like Dan's idea of renting the townhouse. Make sure your association allows a rental and follow the rules. You don't want to incur additional fines for not adhering to the association's requirements for you to bring a renter in to the place.

And, if you CAN find someone who will pay your second and allow you to keep it as unsecured debt, or if your current lender will do that, that's also a good idea. There are investors who will buy up small loans like that and allow you to pay the loan off with interest. Just know, like any other unsecured debt, there will be terms you must adhere to and if you don't, it could go to collection.

Good luck!
0 votes Thank Flag Link Wed Jun 30, 2010
Ty,

You are on target, by taking a course of trying to avoid a "short sale." Doing so would have a very poor impact on your credit.

We would echo Dan's earlier comment, that possibly renting the townhome until a more beneficial time to sell presents itself, is an option. The down side of this is he waiting period is unclear at best and could be longer that you care to wait.

Your best approach may be to do your best to minimize the difference between the amount owed and what the property would sell for and pay the difference hoping to benefit from finding a real savings on your new purchase. Many people in your situation find comfort in realizing losing on one transaction while saving on the next, at times, can be percieved as a "wash!"

Best wishes,

Bill
0 votes Thank Flag Link Mon Jun 21, 2010
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