You have a lot to put down, considering your planned purchase price . . . if you can find a property for $40,000 or so. And that raises another question: Would you be able to find financing in any case on the new property? That loan amount ($20,000) is below the threshhold that most lenders will consider lending. So you might well be looking at owner financing on your new property. Nothing wrong with that; in fact, that can work to your advantage.
However, I wouldn't advise you to buy (or commit yourself to buy) a new place until you absolutely know what you'll be doing with your current home. So, really, that means having a Realtor do a CMA on your current property (to know what it's likely to sell for) and having the Realtor tell you what your present home could rent for, and talking to a lender (to find out whether you could even borrow the money you'd need for the new property, or whether owner financing is your best option).
Hope that helps.
If you have to sell, I would contact a local Realtor and ask about getting a CMA. A comparable market analysis will tell you what like homes are selling for in this market. That will tell you if you can sell your home and still walk away with a downpayment on another property or will let you know that you may be upside down.
If not, if your mortgage is affordable. You could just stay put until the market turns around without having to short sale your property and potentially ruin your credit.
Lot's to think about. I hope it all works out for you. Just know that you are not alone. So many people are in the same boat as you.
I wish you the best,
Oregon-East Metro Specialist
Possible, but I'd have to recommend talking to a Real Estate lawyer first.
perhaps a typo on the $40,000? But, you do need to approach this step-by-step. I would confirm your suspicions with a trusted Realtor that you, indeed, cannot get your home sold for a price that would "get you out of the home". Then I would check with a property manager to see for how much your home might rent (will it cover your "nut"/monthly payment). At least then you will have actual numbers to compare. with those numbers, I would sit down with a mortgage broker and see exactly for what you would qualify. I do agree with Garett and Don that you do need to consult your CPA, possibly a real estate attorney, a mortgage broker and a Realtor to get an organized plan of action. If you want to read about short sales, you can visit http://fabulousportland.com and click on the short sale tab. You can also read a recent post on comparing the ramifications of short sale vs foreclosure: http://fabulousportland.com/2010/07/07/foreclosure-vs-short-sale/
All the best,
Janeese Jackson, Principal Broker
Real Estate Resource
503-709-0802 or firstname.lastname@example.org
As for buying a home now and then trying to sell your current home later, if you are thinking it may be a short sale (where you owe more than what the home is worth), you may run into issues as lenders are aware of this tactic and may not approve a short sale.
There are several options, including selling your current home now and paying the difference in what you owe (as you have cash assets). If you are able to keep some money aside for a 3.5% down payment on an FHA loan you could save your credit, get rid of your current home, buy another home and be done with the process much more quickly than if you were to sell on a short. This would also let you take advantage of interest rates that are currently at unbelievably low levels.
I would recommend you sit down with a Realtor that is experienced with short sales & foreclosures and a top lender. Get some input from a real estate attorney as well as your accountant as their may be tax consequences. Put all your cards on the table and layout the best options. I wish you good luck! Please let me know if I can be of assistance. I hold the SFR (Short Sale & Foreclosure Resource) certification from the National Association of REALTORS and have 17+ years experience dealing with situations similar to yours.
Garett Chadney, SFR
RE/MAX Equity Group
(5030 495-3123 direct