Home Buying in Maplewood>Question Details

Tusmile, Home Buyer in Maplewood, MN

I have the 20% down on a newer home. The problem is i still have a mortgage on my current home. I actually owe more now than what its worth. For he

Asked by Tusmile, Maplewood, MN Tue Apr 5, 2011

same montly payments, i can buy another bigger better home for my money. So i'm going to cut to the chase. Can i buy that second bigger better more expensive home and let this house just go tot he banks? I will be living and homesteading the bigger home. I bought this when i was single and now i have a family of 5. Thanks

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The banks have caught onto this method and have taken steps to prevent you getting a loan if they think you may be at jeapordy of letting your other house go. One of the main steps is that you will have to qualify for both mortgages in order to buy the new home, basically your income has to support the mortgage on your current home and the one you wan to buy.

I would suggest looking into other methods than just letting your house go.
Web Reference: http://www.lennyfrolov.com
1 vote Thank Flag Link Tue Apr 5, 2011
Hey Tusmile,

I have an update for you since this question was first posted. The best solution I can think of for you is to rent out your first home (if the numbers work out so you are not struggling). Then, you can do Contract for Deed aka land contract on your second home. You have the DP needed and probably the income to make it work.

The reason why I would RENT instead of just letting the home go is simple. If you just let it go into foreclosure your credit will be wrecked, and on top you have the 3 year rule for FHA when it comes to repurchase on traditional financing. This way you can simply rent out the home until you are able to sell it, and then refinance your contract for deed into traditional financing. The market is improving rapidly in Maplewood (I work there), and the timeline is shorter than you may think.

You actually won't even need the full 20% unless it gets you better terms...10% will work just fine. I have a special CD program where you can buy ANY PROPERTY off the MLS; not just what you can find off of Craigslist or other CD websites. I would love to speak with you more about it if you are still interested (I know it has been awhile).

This is the only solution I see if you want to buy now. Another option that was not brought before is the fact that you can technically go CONVENTIONAL financing just fine I think in your situation. You just can't do FHA on two homes. This is more of a clarification, because you will still run into DTI issues and probably not get the type of house you want.

If you are still interested just contact me directly through Trulia.

~Chris
0 votes Thank Flag Link Fri Dec 14, 2012
Hello

I am just following up with you to check how is your situation since you last posted your question.

I have several potential ideas if you still need help, I would love to discuss with you


As an experienced real estate agent, I know what it takes from start to finish helping buyers and sellers to get BEST outcome. I bring expert knowledge, valuable experience blended with the latest technology, a well-defined marketing plan, a comprehensive network, energy, enthusiasm and the excitement of a job well done

I would love to help you with your home.

Please contact me today.

My contact info is below.

Thank you,
Ravit Berg.
---------------------------------
Ravit Berg @ RE/MAX Results
http://www.results.net/ravit.berg

Cell - 952.334.4179 | F - 651.460.1272
ravit_berg@hotmail.com | https://www.facebook.com/ravit.berg
0 votes Thank Flag Link Tue Jan 31, 2012
Buy and bail= bad idea. It is illegal to knowingly dump your mortgage on your existing home to buy another home. There could be litigation.

That said, it's not as if you don't have alternatives. I think Christopher makes some very sound suggestions. I would try to work out a short sale deal with your lender, if possible. But, you need to know, that will impact your credit which will make it harder to obtain a mortgage on your next purchase. Sorry, but that's the way it works.
0 votes Thank Flag Link Sun May 15, 2011
yup I pretty much agree with everything said here. I have already had a couple instances this year and will reinforce the fact that most lenders will not count rent unless you have been a landlord for 2 years even!

Your best bet if you are serious is to go the strategic default way and do a short sale with the lender.

I wouldn't just let the home go that will really hurt you in a lot of ways, but you can practically live in it rent free for most likley 8-12 months and use the extra money towards settling with the lender, because you will have to settle one way or the other. If you can settle for 10% of the difference between the sale of your home and what you owe that is a good deal in your type of situation without a hardship.

1 or 2 loans makes a difference, and if you have refinanced that makes a difference. Any client I choose to work with on these MUST also do a consultation with my real estate attorney and if you are smart you will too.


Hope that helps
chris
651-307-7663
chris.block@dhbuyers.com
0 votes Thank Flag Link Thu Apr 7, 2011
Hi Tusmile,
If only you were the only one in this situation. Buy and Bail won't work. Your best bet is to team with an aggressive Realltor who can negotiate a 1) short sale or 2) a deed in lieu of foreclosure with your bank. My team works these problems every week. Maybe we can help you too.

Donald James
Weichert Advantage
0 votes Thank Flag Link Wed Apr 6, 2011
In order for the rental income to count typically they want to see two years of rental history on that rental property.
0 votes Thank Flag Link Wed Apr 6, 2011
Renting out your current home will not work to help offset the mortgage payment. To accomplish this, you need to document rental income via tax returns for it to count as income that will offset the mortgage payment.

The banks see this is a buy and bail situation.

I have been able to get this scenario approved in situations only where the buyer had to relocate for work/military orders.
0 votes Thank Flag Link Tue Apr 5, 2011
Thanks for the replies so far. I have excellent credit and have the cash down for the newer home. If i said i was going to rent my house out, would that work to buy the second one?
0 votes Thank Flag Link Tue Apr 5, 2011
Tusmile,
Lenny is correct; your problem will be getting a new lender to approve your loan with the other mortgage active and underwater. Second homes loans are happening when you have 25% equity in the first home, other than that it's going to be tough to find financing.
You should talk to your current lender about a loan modification. It's true, few of these get approved but if you don't pursue it your chance is zero.
0 votes Thank Flag Link Tue Apr 5, 2011
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