Financing in 84116>Question Details

Matt, Both Buyer and Seller in Salt Lake City, UT

Can I put the remaining balance on a new mortgage after I sell?

Asked by Matt, Salt Lake City, UT Mon Jan 19, 2009

I own a townhome and my balance on my mortgage is $111K. I would like to sell and get a bigger home, but I might still owe money on this loan AFTER selling it. I received a grant from the city when I bought the house for $10K. That amount must be repaid upon sale of the house and I noticed that a neighbor with the same townhouse as mine is listing theirs for $114K. So in order to break even, I would need to walk away with $121K and that doesn't include any realtor fees or anything like that. I doubt that's going to happen. If I end up still owing money after this is sold, can I put that balance on my new mortgage balance?

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Marvin Jensen’s answer

Do you have any other money to put down on your move up home? It doesn't look like you will have any equity from the sale of your townhome. Instead of doing a short sale, which is the only option, unless you have money to pay off the existng mortages at closing, have you thought about renting this townhome for a while, until the market improves? Then use any money that you now have as a down payment on your new home.

Marvin Jensen
Windermere Real Estate
2 votes Thank Flag Link Mon Jan 19, 2009
My pleasure. If you do find yourself in a situation of being upside down in the townhome then I would consider talking to your mortgage company about sellign the property and taking a new note for the difference between what you owe and what you sell the unit for. And since you have excellent credit then they should not have a problem doing so. You certainly do not want to hurt your credit as we have returned to a society where excellent credit is a must. No more if you can breathe in a mirror you can get loan!

This is a fabulous market for selling to buy up. You may take a hit on the townhome but you are going to give the seller on the other side a big hit too and you will probably come out ahead.

Say you sell your townhome $110,000 which is a $11,000 loss or 10% loss. Lets say you go to buy a $200,000 home and you give that home the same 10% loss which is $20, just washed your $11,000 and gained another $9,000 off. Find a great agent to help you and you can negotiate less on the sell of your home and negotiate more off the one you purchase!

I wish you the best!
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1 vote Thank Flag Link Mon Jan 19, 2009
I would like to repeat that it is very important that you get with a trusted lender prior to making any moves. If you lease your townhome and then speak with a lender you might find yourself homeless and having to rent yourself. Why, because the loan programs have changed significantly. Conventional loans now require equity on the rental property and reserves for both the home being rented and the new home not to mention the down payment needed for the new home. If your townhome has an FHA loan then you cannot obtain an FHA loan on the new home.

Bottom line... get with a lender and work from a position of knowledge because knowledge is power. Then connect with an experienced agent that is having success in this market selling homes. And go from there.
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1 vote Thank Flag Link Mon Jan 19, 2009
Matt, You first need to speak with the city regarding the grant and determine if there are any arrangements that they can make with you.

Secondly, there are different options with short sales. And there are options to keep your credit from being impacted negatively. The answered you received below is speaking of a short sale where the bank agrees to accept less the home is paid and you are foregiven the difference which does negatively impact your credit. You can do a short sale where you do agree to pay the remainder of the balance by signing a note with the mortgage company at closing for the balance. The negative equity would then form a new loan and you would be obligated to a monthly payment until the balance is paid in full.

Since you have no equity and in fact have negative equity have you considered leasing your townhome until which time the market turns in your favor to sell? I would advise first and foremost that you speak with a reputable lender regarding your options for purchasing a new home without selling your home and/ or with adding the negative equity to your debt to income ratios. Knowing where you stand is important so that you know what you can and cannot do so that you know what options you truly do have.

Best of Luck!
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1 vote Thank Flag Link Mon Jan 19, 2009
No all mortgages balances must be cleared prior to close, try work out with lender for a short sale which may affect your credit scores.
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1 vote Thank Flag Link Mon Jan 19, 2009
You pretty much just spelled out my exact plan. Just like you said, I figured I'd take a bath on the townhouse, but I've looked at the new homes I want to buy and they are just a steal. I really don't want to miss this opportunity given that the market really hasn't been like this in oh, what? 20? 25 years?

Quick question: that "note" you were talking about - in order to pay the mortgage company the balance? Is that the same as a short sale, or is that something entirely different?
0 votes Thank Flag Link Mon Jan 19, 2009
I do have an FHA loan on this townhouse right now and I know I wouldn't qualify to have this home AND a new one. I think you were right about contacting the city. I emailed them today and will see what they say tomorrow. My credit score is quite high and I don't want to risk that so I guess if I need to I'll get a signature loan to pay off the city if I can break even on the sale of the home. I'm fairly confident that I'll be able to break even on the sale, not taking the city's grant into account.
Like I said, everything is riding on what the city says tomorrow. THANK YOU for all the help and insight!
0 votes Thank Flag Link Mon Jan 19, 2009
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