Home Buying in 55126>Question Details

carol, Both Buyer and Seller in Warren, MI

We would like to sell our house to relocate due to job. We still owe 200K and our house is now only worth 160K.

Asked by carol, Warren, MI Sat Apr 20, 2013

We would like to sell our house to relocate due to job. We still owe 200K and our house is now only worth 160K. The house we would like to buy is 160K. Is this financially possible for us?

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Hi, Carol!
I guess I'm not sure what you're asking here. This is my take:
1. Your current property is "upside down" in value. You can either attempt a short sale, rent the place out and keep making your payments, let it go in to foreclosure.
2. If you have a mortgage payment that you're currently making on the house and you have a renter in there, it might allow you to get a new mortgage if you have enough for a downpayment. Thing is, in order for the lender to take that in to consideration, you will need to have rented it for at least 6 mos. to a year.
3. If you do a short sale or go in to foreclosure, you will not be able to purchase for a couple of years after the final execution of either.

I know this seems a little overwhelming. You may want to talk to a good agent there just to get some advice and lay your scenarios out in front of you. Couldn't hurt to consult an attorney either.

Good luck!!
0 votes Thank Flag Link Tue Apr 30, 2013
Oh and another thing I have learned is that there are ways to work on DTI. For example:

1) If you bought a duplex where one side is already rented you CAN count that towards DTI. Very neat way to increase home affordability for buyers too.

2) If you rent your current home and still don't meet DTI we look at a rental for 6 month's. I have a correspondent lender that is OK with that time-frame, and then we can count it. We would not know for sure until down the road, but regardless this would be the better choice than doing a short sale or foreclosure.
0 votes Thank Flag Link Mon Apr 22, 2013
What about renting the property? I would do that before bringing $50K plus to a closing and trashing my credit. Short sale would prevent you from purchasing again and taking advantage of one of the best buyers markets in the past 1/2 century. Remember in real estate you make your money when you BUY not when you sell so buying at the right time is to your advantage. Find a good property management company in your market.
0 votes Thank Flag Link Sun Apr 21, 2013
Hi Carol,

A couple of things regarding the financing side of it and to piggyback Chris's comment:

1. If you complete a short sale and can successfully document that you were never late on your mortgage payments 12 months prior and up to the sale, you can be eligible for new financing immediately after. A couple additional conditions must also be met: no late payments on any other installment debt may exist 12 months prior to the short sale, the short sale must serve as payment IN FULL meaning the current mortgage servicer(s) may not require any repayment of the difference between what was owed and how much the home sold for and be prepared to "buy down". This is referring to the requirement that as a homeowner, you are not doing a short sale on the current home just to take advantage of the current market.

2. If you are okay with maintaining ownership in both your current home and new home, financing is readily available, as long as your debt-to-income (DTI) ratios are in line with guideline limits. In other words, both mortgage payments (current home and new home) will be factored in when calculating DTI.

Please don't hesitate to call or email me with additional questions.

Sherri Sherpy
The MN Mortgage Mom
Web Reference: http://www.sherrisherpy.com
0 votes Thank Flag Link Sun Apr 21, 2013
1) I am guessing you need to go short on the house you are selling. Either that or we check out your DTI situation and see if you can get away with owning 2 houses. Rent this out and buy another. Wait out the market until it turns.

2) Since you are using "we" I am assuming that means you are married or something? If both of you on the loan then both are negatively impacted from a short sale. That means you wait 3 years to go traditionally again. This is if you start missing payments and go into default. IF ONLY one of you are on the loan then you can go solo or look at a co-signer. Kinda common sense, but a vast majority of the public still seems to think spouses must always be on the loan.

3) Now, if you are current on payments instead, and stay that way throughout the short sale, technically you can buy right away still. Relocation is a hardship so I don't see why this can't happen. Hopefully there is a good team you can turn to in MI for this. I can help find some candidates for you too.

4) Worst case you don't fit any of the above scenarios. If that happens there is still the seller financing world. Contract for Deed and rent to own. You would be an excellent candidate considering you would need to wait 3 years until FHA allows you to refinance. Probably boost credit again too.

The financing is expensive, but rental rates in Minnesota are kinda nuts right now. For example, I work with an investor on contract for deeds who charges 10% interest. It is expensive, but literally almost every analysis we have done it is the same, or slightly cheaper, then rent for that same house.

Certainly a lot more variables to consider, but it first starts with deciding if you want to rent for the next 3 years or not.

Chris Block
Realtor North/NE Suburbs
0 votes Thank Flag Link Sun Apr 21, 2013
You will need to speak with a professional REALTOR, your lender and get an attorney in your area to start the short sale process.
0 votes Thank Flag Link Sun Apr 21, 2013
Hi Carol,

I can't answer your question because I don't know your overall financial situation. You have to consult several professionals directly to assist and guide you and to gauge if it is feasible in many aspects.

Professionals to consult directly are:

1) Realtor
2) Lawyer
3) Accountant

Best of Luck.
0 votes Thank Flag Link Sun Apr 21, 2013
Hi Carol,

You would do a short sale. Keep in mind, your lender(s) has to approve the short sale and you have to have a provable financial hardship - moving due to work qualifies.

You should talk to an accountant (for possible tax ramifications) and a real estate attorney. A short sale will negatively affect your credit so you probably won't be able to purchase again for a couple years.

Shanna Rogers
SR Realty
0 votes Thank Flag Link Sat Apr 20, 2013
This is possible but it is going to take some planning and I would need more details. For instance, there are some banks that will let you keep up to $10,000 even if you short sale. This information is very new and I just found out about it a couple of weeks ago.

Also, buying a home would depend on how you communicate that to your mortgage person. I know I may sound vague but I would need more details on it.

You can contact me any time tonight or any time tomorrow. I am doing an open house tomorrow so I will have plenty of time to talk through this.

Chad Kenning
Greater Midwest Realty
0 votes Thank Flag Link Sat Apr 20, 2013
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