If you can't find a buyer for your property than try to negotiate a deed-in-lieu-of-foreclosure. f that does not work it seems inevitable that the bank will eventually foreclose on your property.
In most cases banks won't lend you money right after such a dramatic financial default, at least not for a decent rate. The market will probably not move too much in any direction for the next 12 months. So you could rent for a year until your lending power is better.
Hope this helps.

Weinerdog,
It seems we are missing some information.
You are asking about a loan for a new home but it seems you are not dealing with your current home. You need to work out something with the bank to resolve your current home's situation - short sale, deed in lieu, or it will eventually be foreclosed.
For your future housing situation you might want to consider renting. I would recommend to sit wit your accountant and agent to work the numbers.
Good luck!

Weinerdog,

My apologies I had 401(k) loans and hardship withdrawals confused in my head - then again it really isn't my area of expertise which is why I advised you talk to your accountant on the issue. There is still some risk involved that you may or may not be considering:

http://www.daveramsey.com/article/hands-off-that-401k/lifean…

Ultimately you are going to do whatever you want to do, so I'll cut to the chase on my opinion on the matter. I think you (as most consumers do) want a quick and easy fix to getting out of your current upside down mortgage and the associated payment and you want to hop into another fire sale property that you own without facing any of the repercussions of your decision. You see clearance sale prices on everything around you and are trying to game the system by forcing someone else to take the loss on your current home so that you can run over and buy a different “on sale” house.

Look, as someone who negotiates short sales for a living I have no love loss for the banks and how they treat people sometimes; but for you to sit there and tell us that you have a pile of money that you are willing to spend on real estate (just not your upside-down house) and that you are deserving of a short sale is sad. Why should the bank help you out when we are all working on files where people are spending their last dime keeping their houses current and are asking for the same help? Worse yet, it appears that you are willing to just let the place go and then run off to buy another with your other money.

I've heard consumers call it a "business decision" or say that "they need to do what is right financially for their family." You told me that you wouldn't end up with the "same thing - not even close." Really its all just cover for I want to take the easy way out and have someone else pay for my misfortune or bad financial straights.

I'm not an old guy but I remember a time when people honored the contracts that they entered into. Not because it was convenient or it was easy, but because it was the "right" thing to do. What was right used to be right regardless of circumstance. Now consumers have decided that they deserve a do-over any time they make a bad deal, but oh yeah - it can't cost them anything in the process.

I'm not questioning your ethics or you honor - yet. You’re in a financial pinch and you’re scared, my hope was that you would realize that if you’re a willing to spend “x” on “y” that you should also be willing to spend “x” on “z”. Not because it’s easy or because it would be a great financial deal, but because you are a person of integrity and you agreed to do so.

Cameron Piper
licensed MN Broker
Coldwell Banker Burnet

Weinerdog,

I wasn't suggesting that you use your retirement to keep your current home. In fact I think pulling money from your 401(k) was an awful idea because of the penalties.

I was trying to understand why if you were willing to pull $70k (assuming a $100k purchase price, which would be on the low end) from your 401(k) to buy a new house, why you wouldn't be willing to pull $70k from your 401(k) to make monthly payment on your current mortgage. Assuming that you had a $2,000 mortgage payment, that amount of money would float you for 35 months. I have to assume that your wife would be able to find another job in the next 3 years. In the end you end up with the same thing - $70k missing from your retirment account and a house you have to make payments on.

Cameron Piper
licensed MN Broker
Coldwell Banker Burnet

Will the bank not just modify your loan? If not catch up your payments with your 401K and save your credit. If you want to get out still sell it. Go rent something at a low monthly rate until you can buy again. Preserve your credit. 70% of what anyway? Short sales and foreclosures are for people with no way out. You have the means it sounds like to fix it. I think any quick way out other than loan modification will end up costing you more in the long run. Years of not being able to get credit and when you do the highest rate that can be charged. Most mortgage companies have financial advisors that are willing to give you the best route to take.

I could be wrong, but it doesn't seem that anyone has really addressed your question of whether or not you can get a loan with as much as 70% down while in the midst of a foreclosure.

First, let me start with short sales and add something no one else has mentioned. In a short sale, if it is not PRE-APPROVED by the bank, then they have every legal right to go after you for a deficiency judgment. That is the amount of difference between what they actually walk away with after all other liens are paid and what you actually owed. Pre-approved short sales, however, the bank has already, pretty much, agreed to take less and forego the deficiency judgment. However, banks do not pre-approve short sales unless you;re between 3 and 6 months in arrears. After that you're in the foreclosure process; it seems you are aware of this and already there.

As for getting a loan with THAT MUCH down payment after a foreclosure, it will, indeed, be a very difficult process but there are banks out there that will do it, regardless of your credit and the foreclosure; the rate, of course, will be unbearable but can be refinanced EVENTUALLY.

Also, most banks won't give you the short sale with that kind of asset in your 401k. But on that particular aspect I am foggy at best, so consult your attorney regarding that.

One other route I did not see mentioned (but I did not read every response) is doing what is called "deed in lieu of foreclosure." This is the process in which you simply hand over the keys to the house and sign the deed over to the bank and walk away. This, too, should be discussed with your attorney but it is very effective and can save your credit.

RENT for a while, rebuild and renew, then revisit the home buying issue at a later date.

I hope this helps,

Jay Dollinger
Houlihan Lawrence
White Plains, NY

I dont see any comments here to if Minnesota is a recourse state or not. If MN is a recourse state, that means that lender has recouse to recover the defficiency. Lender can sell shortage to a collection agency and pursue you for ten years unless you go through bankruptcy.

Since this question was asked (and responded to) almost 2 months ago...............perhaps the poster can fill everyone in on what his decision was.........no sense continuing to offer advice on a question that might already have an answer.

You make a good point Mark, I almost asked why they were not taking that money and saving the existing house. However, I do not know the situation well enough to comment. In regards to your question, I know it varies from state to state, but here in CA:
Lenders may not get a deficiency judgment if they foreclose on under a trust deed. They almost always foreclose under a trust deed. A judicial foreclosure will allow a deficiency agreement but I have never seen an institutional lender foreclose using one. I have seen private lenders doing so.
The problem is if the first forecloses and there is a 2nd, the 2nd now rolls into personal debt. This debt many times is sold to a unrelenting collection company who will do things like garnish wages and obtain judgments, not to mention phone 5 or 6 calls every day . This then forces people into chapter 7 if they still qualify for it. Under current laws most homeowners do not qualify for a chapter 7 due to the maximum income requirement.
Under a short sale agreement, the 2nd would be deemed satisfied as part of the short sale. So at least if there is a 2nd mortgage a short sale is a much better option. It does make the short sale much more complex if there is a 2nd mortgage but it really is worth it.

Weiner
I read your reply further down, this does appear to be a strategic default situation, your "throwing good money after bad" comment Making homes affordable, HAFA/HAMP assume you want to stay put and get a better rate to make the current payments doable. Doesnt sound like you want to stay even if you had a loan mod, you want to move on and buy something else thats a bargain with 401k money. Thats strategic default.

You can make a short sale work at a price that will sell and be prepared to bring some money to the table. A short sale is not designed to limit loss for a seller. I dont think you can get a mortgage for 3 years with a short sale, and 5 years-8 with a foreclosure. So rent!

Highly unlikely you will be able to get another mortgage.

I would call short sale agents who specialize in Minneapolis.
I would recommend you request the following in writing:

# of Active Short Sales
# of Closed Short Sales
Certifications
At least 20 References from Short Sale Sellers
# of short sales closed with your mortgage company

The more short sales the agent has closed the more likely they will get you approved for a government short sale program.

I would address your current house before deciding to buy.

Also, if you have more than one mortgage I would strongly encourage consulting an attorney before buying. I have seen 2nd mortgage companies obtain judgements after the 6 month redemption.

Don't give up on the Short Sale; there are agents out there that can get your short sale approved!

Well, I will give my opinion, and answer your original question.

Can you get a new mortgage?
I highly doubt it.

(my own question)
Should you get a new mortgage, even if you can?
I advise against it.

Should you use your 401K to put 70% down on a new home??
NO

The last thing, imo, you shoud be thinking of now is taking on added debt when your current home is in foreclosure.

I am not being judgemental - quite the contrary - I just think it makes better sense for you to rent at this time......until your wife gets a new job, until you save up some money in addition to your 401K ......and get back on your feet financially.

Adding on new debt is not the prudent thing to do.
Renting may be your only option, even if it's not what you want to do.

Best wishes.........

cameron-because i'm not going to throw good money to a bad situation-we can't afford our place on my income. Now your saying I should use my 401k savings to try and stay current? That is an awful business decision.

Weinderdog,

I just sat down and discussed your situation with my loan officer and have quite a bit of wisdom for you in this matter. As Christopher mentioned below, I would not give up on the short sale situation. This puts you in a much better negotiating situation at a later juncture and although I cannot promise what the rules will be in a year or 3 years, I can tell you what the unwritten "plan" is that we are hearing. And it is NOT good for foreclosure victims.

I would highly recommend giving me a call when you have about 15 minutes to talk about this. There is a LOT at stake here for you and your wife. Don't waste any more time on wondering. You can do a lot and do it quickly and I think you would be pleased with the possibilities. I unfortunately do not have 45 minutes to type it all out here for you. I can type 70+ wpm . . . but I can talk at about 600 with sudden bursts of 1000 wpm!

I look forward to hearing from you, Weinerdog,

Mark

Aside from trying to obtain a mortgage for another home purchase, consider whether buying another home is a smart move. Your wife lost her job and you will soon be foreclosed on your current home, which will be catastrophic for your credit. Perhaps renting for the next 5-10 years would be better for you. Otherwise, you may end up with another foreclosyre in 3-5 years.

Eventually, yes. My experts tell me that with such a large downpayment and having rebuilt a good credit history you could probably be approved for another mortgage in 5-10 years.

YOu can get a FHA loan in 2-3 years. Other wise try contract for deed-rent to own -owner financing good luck.

If you are EVEN considering pulling out money from 401K to buy a home, you lack the financial knowledge and the financial discipline required to buy a home.

Rent for a few years.

You'll not be buying a house with a foreclosure on your record, that would take about 7 years to clear. However if you go to an attorney you may be able to fill a chapter 13 and do what the call stripping which will reduce the mortgage you have now, time is of the essence so hurry!

Good luck to you. You are not alone.

Wow, I was going to answer this question but I just noticed you have already received quite a bit of advise. Allot of it seems to be pretty accurate....

Two years after a short sale and 4 years after a foreclosure. There are so many desperate sellers out there right now a land contract with the requirement to purchase within 4 years could be a great option for you. Especially with the down payment you are able to provide. Unload the property and start over via a short sale.

Most banks will not lend until 3 years after a short sale and 5 years for a foreclosure. You can look at owner financing options or find a cheaper home and pay cash with your 401k funds.
You may also try a load modification or you could certaily bring your payments current with 401k funds and hang on to it. There are many options. Find a great agent and get educated before making a decision but do it quickly before the foreclosure sale takes place.

Unfortunately no.You are better off to try and short sale your property, and it sounds like you will have to reduce the price to get it sold. Also, use professionals that are experienced in short sales. From there you will have to rent and save money and build up your credit. Just try to keep a positive attitude and remember you are not alone on this journey. The sooner you get out the sooner you can start your new beginning. Good luck !

Dear Winerdog,

You have gotten tons of information from a lot of us. Bottom line is, it seems that a great plan for you would be to short sell your home, renting for at least 3 years and then purchasing a new home. During the 3 years you are renting you are saving money like crazy, do not touch your retirment funds and keep your credit in good standing so that you are ready to take advantage of the lower pricing when the time comes for you to buy a new home.

One thing to remember, in life you sometimes have to take one step back to move forward (in a new direction); rather than continue to move forward in the wrong one with lots more headaches.

C

Lots of good info has been provided - We typically ask our Buyer clients to speak with a loan officer at the bank/credit union where they have their checking account. Often they have the lowest fees - Worth looking into, right?

I would be concerned about using your 401 to try to get a new mortgage on this property. I would focus on short selling this property, which will have less of an impact on your credit then a foreclosure. Make sure the short sale request is approved by the bank first. Look at the prices for properties similar to yours and price your property at least 20% below the midpoint of these properties. Based on the amount of time you have, I would move the price point down by 10% every month until you get an offer.

Weinerdog,
If you are 62 years old or older, you can purchase a home with only 50% down (or LESS if older) and you will not have another mortgage payment for life. Look into a reverse mortgage purchase if you fall into the correct age bracket. Do not pull hard-earned, well-saved retirement money out of your 401K to 'save' a home that's already underwater. When it comes time to retire, it's all about you, not the mortgage payment! I hope this is useful information.

You should always check with a mortgage lender. It may depend upon just your credit. There are many ways to approach a loan. Call you mortgage lender on Monday.

Have you had any showings on your home at all? Showings but yet no contract? I am trying to understand the actual problem as to why it hasn't sold. Unless it is really bad and overpriced it should sell. We are trained to reduce our listings with the declining market aggressively until we get a contract.

As far as buying another home I would say talk to a lender but most will want you to wait and rent for a year after the short sale is recorded.

Robin Fraser
702-622-0601
Realtor. Broker-Sales
Epro, SFR, CDPE, CIAS
Keller Williams Realty, The Market Place 1
1333 N. Buffalo Dr. #270
Las Vegas, NV 89128
Email FraserProperties@aol.com
http://FraserPropertiesLV.com http://www.RFTeamHomes.com

If you want to stay in your home and reduce your payment by 50% you can do a Sale Lease Back
http://www.houseleaseback.com

Have you tried modifying your loan through your bank. If not, this is likely your best choice at the moment. You do have a true hardship, and perhaps your bank will cooperate.

Honestly you are going to have to speak to a lender. If both of your names are on the house then both of your credit ratings are going to be affected. But you might want to contact your mortgage company to see if you do have any other options.

Do you have your house listed? If you have the property listed try listing below what you owe and have your agent work a short sale with you. Banks have gotten much better about working with people in the short sale department. First you should call your bank and talk with them and see if they are willing to work with you in this manner.

No worries Jay!
This is a moral hazard area. One can buy a neighbors house cheaper than what is owed on current home. Just because someone can, does that mean they should? And just because someone can, does that mean it should be consequence free? Not much different than trading your wife of 20 years for a new one after you realize wife #1 isnt getting as big an inheritance as potential wife #2.

thanks for your advice, very new to this.

Jack
I am surprised you say settlement at closing is it and youre done. There are two issues at hand, one is the satisfaction and the other is the release. Sure the bank will grant a release but the hard part is getting the satisfaction letter. That is why i ask someone from MN to address if it is a recourse state.

Jay
If you read down this question has been overanswered many times and your answer was wierd. Wienerdog is wanting to buy and bail, doesnt want to throw good money after bad, read from the bottom up.

You may be able to stop your home from going into foreclosure by adjusting the price of your home to attract more buyers.

Lower the price of your home so it sells on a short sale. Then find a seller carry property from someone who owns it free and clear - even if you have to go to a new city so your wife can find another job- and have the seller carry at least 7 years. Rebuild your credit so that in 7 years you can refinance out of the seller carry. Who knows what rates will be then. Best would be if the seller carried for at least 30 years but that might be hard. Seller carry properties usually want more than the going interest rate, but all is negotiable. So of course is the price but usually they want a higher price too.

Each lender has their own guideliens.

You could use a private money loan and put down 20%- 40%. Of course the more you put doen the

If you have that much to put down you may want to use some of it to cure your current loan and then short sale or modify it instead of foreclosing.

A short sale is much better than a foreclosure.. If you have this much money down you may want to consider this to save your credit.

One last thing to think of.

We have consumer protection laws FDCPA and FCRA, if you decide to cure (pay) your delinquency) you could then dispute the foreclosure on the credit and possibly get it removed.

Best of luck,

JoAnna Jensen

Weinerdog,

You are absolutely correct, more lenders will not give you a loan after they find out you had gone through the process of a short sale. If you successfully short sale your home, you will need to wait at least 3 years to apply for a new FHA loan and 7 years if it is conventional. If you go through a foreclosure the time frame to wait will be much longer, so I will suggest you try to short sale it again and hire an agent who will price it accordingly to the market conditions to secure an offer. However, you bring a good point, if you have 70% to put down on a new home, you may want to consider purchasing a smaller home, all cash if you have that much saved and can buy something you like with your money.

Dear Weinerdog, if you tried a short sale and you didn't get any offers probably your property was overpriced, you need to talk to a Real Estate agent who knows your area and has experience with short sales. Regarding to buying another property even with a lot of down payment will be hard because of the credit rating.
Raul Lozano

What you can do is sell your home subject to and downsize to another home where you can afford the payments, and which is being sold subject to. For an explanation and video, go to FastSaleFullPrice.com

Short sales aren't selling well even if the bank grants them, because way fewer people can get financed on a new loan. Subject to works because it is owner financing.

Sellling subject to will not harm your credit. It can produce a buyer quickly, sometimes in days. It can be done by yourself but it costs you nothing to let us handle it for you. Plus then you have access to a database with over 10,000 buyers ready willing and able buy subject to.

The drawback to subject to is that your buyer takes over the payments on your loan, but you remain responsible for the loan. Which means if the buyer stops paying you get the home back, but you still need to make the payments, at least until a new buyer can be put into the home. That sounds scary, but instead of losing by taking a 70% downpayment out of your retirement, you would only have to take a few payments out of your cash....not 70%! And that is only if your buyer defaulted.

With the crash in the economy there are many good people out there who used to qualify but now that the banks have raised their qualifications, they no longer qualify. Or maybe, as with your wife, they used to qualify but no longer do EVEN THOUGH they have gotten a new job, they don't qualify because it's a new job.

These people are ready willing and able to buy a home subject to. They can afford it just fine. They could not have bought your home on a short sale because, like you now, they do not qualify for a loan. When they can qualify later, they will refinance. If your loan is FHA, in five years they may qualify to simply take over the loan, not just the payments... so then you would be off the hook for the loan at that time.

I'm not a lawyer or an agent, so this isn't legal advice, but it seems to me to be a better choice in a situation like yours, to take a few payments to hold in reserve in case you need them, instead of taking this huge hit to your 401k. And then selling the home subject to instead of having it foreclosed.

Some people will try to scare you out of selling subject to by stating the bank can call your loan due. But the facts are that if payments are being made the bank doesn't want to get the home back, and the national law firm we use has never had a bank do that and, in fact, gets an agreement with the bank when the deal is going to be done that the bank won't do that. That's another reason why it's good doing this with us.

Check it out at FastSaleFullPrice.com to get a better understanding. At the very least it will give you an option most folks don't know about. It's sad when people lose everything to foreclosure when they don't have to.

I think anything is possible but it may be a higher interest rate than you may be willing to pay. I never recommend using your 401k money because you never know what may come up in the future.

No, sorry. The bank will not finance you due to your poor credit.

In speaking directly with underwriters regarding foreclosures and short sales and hardships, health issues are the only acceptable explanation for obtaining a new mortgage with no waiting period

There are lenders who will loan with a minimum of 30% down payment without the set waiting periods.

These lenders will be private investors and may not offer the nice, low rates that are advertised in the media.

Any good agent will know that a short sale is considered a final settlement. The banks do not persue the seller for the deficiency unless the seller signs a promissory note agreeing to pay the amount. This is standard proceedure. None of my past clients have been pursued after closing on their short sale. Yes your credit will get marked, but minimally. FHA will allow you to purchase a new home in 3 years. This is the best case scenario for home owners facing this situation. You should seek legal advise if you have questions or see the FHA website for the guide lines. Finally, get a knowledgable agent from your area. Too many agents today have little or no knowledge of short sales.

You may want to revisit the idea of refinancing. Your hardship may qualify you for a mortgage modification.

Regarding a short sale, you might find the discussion helpful a this link:
http://www.bills.com/a-deed-in-lieu-of-foreclosure-vs-a-shor…

A short sale is your answer. The home did not sell the first time around probably due to the price. Keep in mind a short sale is a short sale no matter if it is 5,000 or 205,000. The bank will approve at the contract price if you have the documentation (comps in the area for BPO agent) to prove it. After the successful closing, FHA will allow you to buy another home in 3 years providing you have established some new credit of any kind. After closing more than 100 short sales, the process is fairly simple now. Get an agent in your state that has track record.

Get a short sale quick! It can be done. Call around and find a Realtor (CDPE) who is willing to help you stall the foreclosure process. A foreclosure will be on your credit for much longer than a short sale. A short sale isn't ideal, but it's better than the alternative!