I've worked hard all my life, always paying my bills, and I find it horrifying that I can't find a way to avoid being homeless within the next couple years.
Essentially.......it is the same as stealing and should be dealt with more harshly than it is now.
I am reading the responses below and am appalled. So you choose to buy a house, you shopped for a good loan, you talked to a Realtor and asked appropriate questions about the market and listened to Alan Greenspan say there was no housing bubble. Then the market starting tanking and you think everyone else should have known this was coming??? Noone questioned it all when pricing were going up and your 401K was going up. We just bought more and more and more and thought it was our American dream. What difference does it make what your house is worth if you don't have to sell it? You have no responsibility to pay your debt back because your house is worth less than you paid/owe on it????? Hello, look in your garage at that car you own. That is ALL of us - me included, on all 4 of my houses. So let's all give our houses back to the bank? SERIOUSLY? So if your house had gone UP in value, would you have paid the bank MORE for it? Who said your house was guaranteed to go up in value?
People, just sit tight and pay your mortgage. There is historical data suggesting that it is not unusual to see Real estate go up and down in value over time. If you have to move, rent it out and rent another house or rent out a room. The market will likely rebound in time. And if you keep paying your mortgage the balance goes down. In the meantime, take some personal responsibilty here. What a crazy sense of entitlement we all have in America. If you lost your job, deliver pizza's/find any job you can even if it is beneath your standards. Maybe a stay at home spouse has to get a job, maybe you need a 2nd job, cancel cable, eat at home, buy generic, grow a garden, no vacations, carpool, sell your unused stuff, get rid of the SUV payment and buy an older used car in good shape, negotiate with your credit cards, not your HOME. Watch the Dave Ramsey show.
This isn't STUPIDITY, this is life. If you foreclose or do a short sale, it is unlikely you will be able to buy another house for about 3 years. Banks have caught on to the bright idea of buying and then letting the other house go, they are looking for this now. Your credit is ruined. All your other interest rates on your debt is likely to rise. You will be renting anyway. Then you will see the house you let go rebound in value and you will be kicking yourself. America - let's grow up and take personal responsibility. For all of you that are paying your mortgages, thank you. Because of you, we will get out of this mess sooner!
The answer is yes you can buy a house a short sale yours. To do it immediately, you would need to be able to qualify for another mortgage and the lender will consider your current mortgage, too. If you do not qualify for a loan, then you would have to pay cash.
If you short sale your home before December 31, 2012 and it is not your primary residence, you may have a tax issue. You need to speak to a short sale specialist, and attornery, and your accountant. The waiting period to qualify for another loan after a short sale can be as soon as 2 years.
The truth is there are Owners who pay the mortgage on time, are upside down, and they have to sell. There is no program for those Owners, except to default on the loan or pay the shortage.
There is no program for the Owners who are at a high interest rate, upside down in value, and would like to refinance, either. There is only 1 that I know of, and you have to be at 105% LTV. Most are above that benchmark.
In my opinion, the Banks got bailed out and the folks who default have special bailout programs, too. However, the folks who pay their mortgage on time and are underwater get NADA. "They" really screwed up the housing recovery by not addressing these issues. I do think Wall Street and Main Street learned a really harsh lesson and we are all paying the price.
Why should we take the hit when we were acting responsibly? We did not cause the crisis. We bought what we could afford. But now we end up being the ones paying for other peoples' irresponsibility or greed. From a business perspective, it would totally make sense to buy and bail at this point.
We have no credit card debt, paid off student loans before buying a house, waited to start a family until we were financially stable. Our only other loans are our car loans.
This whole thing is rotten, and the responsible people are the ones footing the bill. Could someone please explain to me how staying in this house is not an act of extreme stupidity?
You are on a real estate site asking for information. You wil get real estate agents answering! Bashing the people because you don't like the answers doesn't seem terribly appropriate.
If you want legal advice from an attorney - call one and hire them.
I am just curious - if you can't afford to make payments on the home you are in - why do you want to buy another one? if you have money to make a new purchase - why not work out something with your current lender, and take care of your current obligation? I am sure those financial advisors (whose advice you are seeking ) will appreciate your good faith efforts.
A lot of mixed answers below. Reality is.... if you can manage purchasing a new home and qualify for a mortgage, then list and attempt to short sale your home, then the answer is yes...
Until you try, you'll never know, but you can lose everything you have in the process. Speak with a real estate attorney for more specific advice; they'll analyze specifics and tell you a more precise answer.
You can assume rate of growth at 3%, the rate of inflation. You need to have a pretty good idea of what your home is currently worth.
With time, and patience, your equity will come back. A 10 year time horizon is reasonable, and at least 7 years . The best approach is to follow this method:
a) Create a 3 to 6 month cash cushion in the bank first. If you lose your job, extra principal payments will not help you.
b) Pay off your credit card debt and pay down your consumer debt
c) Sell your expensive SUV or Luxury car and trade for something smaller and very inexpensive.
d) Use the combined cash flow freed up with all of the above to then apply extra principal payments
Use the link above, as I found it to be an excellent reference guide and I recommend it to others.
And yet here we have someone acting within the letter of the law, trying NOT to cost taxpayers or others money, and he/she is getting attacked by people who read one thing and automatically assume much more.
Besides, one of the things holding back the economy is the real estate market has not worked out all of the inventory of homes still at bubble mortgage balances. Until that happens, the real estate industry will continue to weigh down the economy and hold back any recovery.
What this person is researching is logical for all parties involved. If he/she holds onto the current property, how long til short sale or foreclosure anyway? If he/she purchases a smaller, much more affordable home, he/she will have more disposable cash and will start consuming more/paying down other debt sooner, thereby helping boost the entire economy. The banks wouldn't agree to this if it weren't in their best interests anyway, so I commend the person for investigating all the alternatives.
The FHA is now lending with credit scores as low as 500!!
However, if you are CURRENT at the time you do your short sale, and have no missed payments, you can buy again IMMEDIATELY. However, even if you are one payment late, you have to wait 3 years before you are allowed to buy again.
You can do a short sale by having a hardship. That hardship could be having to move to another state for a job change. That hardship could be a divorce. That hardship could be crime in the neighborhood and you feel unsafe. It's not always necessarily a financial hardship.
So stay current on your house. Get financing for the new one in place and find one you like. Short sale this one and try to get it approved without missing any payments. It's tricky to get it approved, because why would the bank approve you if you are current? But it is possible.
With that being said I will finance you with 20% down. Banks try and measure your good intentions by past history. My program just requires that you put your money where your mouth is. Check out my owner financed inventory on my web site.
Before people start making all these judgments maybe they should ask or know a little bit more about Rafi's stiuation. I purchased a home that had a ballon loan and the person i have to blame is the LOAN OFFICER and BANKS! I was a first time home buyer and they explainded to me that I would need to get out of the loan at a certain time. When it was time for me to refinance my home value dropped $50,000 so it was not easy to find a loan. I was soooo desperate that I took the only loan I was able to get that was almost 10%!!!
I took this loan to avoid the ballon and it was almost $400 more then my original. When my salary dropped 15,000 and having $600 heating bills for a town house things started to get tough!!!! I maxed out all my cards in order to pay everything on time. I tried calling my bank and filling out paperwork to get my intrest lowered and NO help!!!!
SO paying $2,400.00 after HOA fees for a town home that I paid $269,000 thats now selling for 125,000!!! The fact that i started to fall behind and 2 years of trying to get help from my mortgage and NOTHING no choice but to do a short sale becuase I couldnt even rent the property! I tired programs with NACA i took out a loan from my 401K to pay a lawyer and still NOTHING!
What do you have to say no people???
If you do need help with a short sale please feel free to email me at email@example.com
Everyone is right although I think we can all play nice. However, if you want to stay in your current home and try to sell it on a short sale you may be able to do that, especially if you ARE experience financial difficulty meeting the payments. I know that some lenders are allowing people to purchase a new home within a year after selling their previous on a short sale. That situation is the most likely scenario.
If affordability is a problem, a loan modification might be another option. Have you talked to anyone about that yet? There is free government help for that. Here's a link: http://www.hopenow.com/
I do hope that everything works out for you and if there's anything else I can help with please let me know.
Have a good evening.