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Can you buy a home with no money down and short sell your existing home that is so underwater?

Asked by Voices Member, Wed Apr 25, 2012

We are current on our home payments, however things will change after the interest only expires and the payments will go up. Our current home is over the 125% underwater that it was even denied for HARP. A lending company that was working with us said that it is best to buy another home and short sell our current one. This is not the first lending/mortgage company to say this. Any advice will be wonderful. Thank you.

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I would recommend first trying to speak with another lender with regards to the HARP 2.0 program depending on the investor over lays some lenders are capped at 125% or 150% and some have unlimited loan to value ratios so it is worth a second look. Freddie Mac is updating there automated system to issue more loan approvals because currently Freddie Mac is lagging big time with regards to loan approvals vs Fannie Mae. If you currently have mortgage insurance and you decide to buy and bail it is not matter of will you get caught it is matter of how quickly will you end up it jail. If you can qualify with both payments consider renting your existing home the rental market is HOT right now and can be a great tax benefits. Have a mortgage professional put together some projections of how long it would take for your current property to get right side up again, it may not be as bad as you think. If you go the short sale route it is possible to short sale your home with out going late so don't go late on your mortgage just because your currently lender tells you you have to go late in order for them to talk to you about short sale that's BS.. I would highly recommend consulting with a real estate attorney as well. Hope that helps.
2 votes Thank Flag Link Wed Apr 25, 2012
I had a short sale last year and my Realtor recommend http://www.cfs-mortgage.com/flex for a home loan. I am very happy to be able to purchase again.
1 vote Thank Flag Link Tue May 14, 2013
I would love to help you out and give you some advice, I do need a little more information on your property, and some other things...

Feel free to contact me at 480-275-9566

I look forward to hearing from you soon!

PS. Can't wait to help you out!
0 votes Thank Flag Link Tue May 14, 2013
I would like to look at the numbers to see what your options may be.

Short selling a home can really make a dent in your credit for a couple of years and there may be different strategies to look at since we are in an improving market.

Please feel free to contact me to discuss all the options available.

John Forsyth j4syth@cox.net
0 votes Thank Flag Link Tue May 14, 2013
The policies in place create this kind of thinking. The kicker is that this is acceptable nowadays! I believe what is unethical is my property taxes going up every year and the value of my home going down every year. Taxes need to be a set rate and government needs to adjust to it!!!!
0 votes Thank Flag Link Fri May 3, 2013
Maybe I'm confused....I've only been doing this for 17+ years.....but doesn't this sound a bit unethical?
0 votes Thank Flag Link Sat Mar 30, 2013
There are many different loan programs on the market right now. You will want to connect with a lender and get a pre-qualification letter in hand and have all your questions answered prior to deciding what route you will proceed. I am a very experienced short sale agent and have recommendations from many of my client on my trulia.com profile. I would be happy to help you!
0 votes Thank Flag Link Sun Jul 15, 2012
" I have also head that you can qualify for an FHA loan right after your short sale so long as you did not miss any of your payments."

No, don't think so.
0 votes Thank Flag Link Sun Jul 8, 2012
You will want good legal advice. Call me for an introduction to a Real Estate attorney specializing in this area. The first consultation is free. If you decide to go forward with the short sale after the first consultation they will ask for a one time fee/retainer of $300. I would like to be your Realtor.

Regards,
Loren Hoboy-Realtor
Central AZ Real Estate
LHoboy@centralAZhomes.com
Your Local Expert
623-688-0004
0 votes Thank Flag Link Sat Jul 7, 2012
It can be done, but I would reccommend consulting with an attorney and an accountant before using this strategy.

There are many things that can be done to help regarding being upside down in the home.

The key advice is make sure you protect yourself from later ramifications.

I have strategies avaialble to help.

John Forsyth HomeSmart Elite
602-625-4675
J4syth@cox.net
0 votes Thank Flag Link Sat Jul 7, 2012
If you have the income to carry more than one mortgage payment, it may be easier to purchase a new home first, while you are still living in your current home. Once the new purchase is complete, you can then short sell your current home.
0 votes Thank Flag Link Fri Jul 6, 2012
You might be hard pressed to find a no money down program but if your credit qualifies you could purchase a home with as little as 3.5% down. I have also head that you can qualify for an FHA loan right after your short sale so long as you did not miss any of your payments. If you do choose to stop making your payments as most people do you will need 2 to 5 years before you can be financed, unless you get a hard money loan with high interest rates. Check out http://www.UrbanPhoenixRealty.com for more information!
0 votes Thank Flag Link Tue May 8, 2012
Starboard Financial has a program that allows you to buy a home after a short sale http://getprequalified.com/second-chance-mortgage-program-arizona/ You need 25% down however.
0 votes Thank Flag Link Mon May 7, 2012
You’re kidding right? You think you can just Short Sale a property and buy another one with no issues? Everything is all peachy creamy? When the short sale is over and property sells, the bank will tell you don’t worry about the 125% or $100K you owe them? OK here’s the real deal. Listen to me or the used car salesman. Sorry if I sound rude. At least I’m honest and truthful.
You tell a lender your short selling a house and at same time buy another? If that Short Sale sells, the bank will come after you for the 125% covers the debt that is owed. So get ready for that unless you fall through the cracks and get away from this robbery you pulled. In the mean time you will be surrounded by yes men from the mortgage lenders. They will give you phone numbers, websites, HARP info leading to nowhere at the end. When this info hits the underwriter desk, they will laugh for about 4 minutes and toss application in the shredder.
I’m sorry. You’re screwed. Accept it don’t get mad at me. You’re stuck with the 125% under water property. Short Sale it FICO is in the crapper for 2-5 years. FICO will rise but you will have a record of the short sale. When you apply for another loan mortgage reps will see this and will hit you with higher interest rate because now you’re a risk.
For now stay in the house as long as possible. When that interest only expires and the payments skyrocket up, try your best to pay or pay something. If not let them kick you out. Can maybe stay in house 6 months up to 2 years paying zero mortgages. In the mean time bank all your money.

You might be saved if you live in Arizona. Bank may not come after you for the difference; Arizona has an "anti deficiency" law (ARS 33-814) that gives protection against the foreclosing lender (but not the second mortgage holder, if there is one) when the house is foreclosed on. Many attorneys read 33-814 and case law to include short sales as well, some caution that 33-814 does not specifically say it applies to short sales.
Within the next few years, you are likely to get a 1099 from the lender reporting the "forgiveness" of your debt as income to you when they write it off: currently the federal 2007 Mortgage Forgiveness Debt Relief Act protects you from paying tax on that "forgiveness" if you qualify. It will sunset in 2012 unless Congress renews it.

Here’s a blog to read. Read the first sentence.

http://ezinearticles.com/?Can-a-Bank-Come-After-Me-After-Ive…

Good luck out there,
0 votes Thank Flag Link Thu Apr 26, 2012
The solution recommended to you has certainly been done by many in your situation. This type of advice should really come from an attorney or CPA. Did the lender mention you would have to qualify for loans on both properties? I would think that would certainly be the case, but that should be confirmed with a lender. Good luck.
0 votes Thank Flag Link Wed Apr 25, 2012
Hey Loren, it might not be fraud or illegal but it's unethical. That's my story and I'm sticking to it.
0 votes Thank Flag Link Wed Apr 25, 2012
James, There are 7 states in the nation where the lender cannot pursue a borrower for the deficiency (under specific conditions). The lenders either knew or should have know about their collection rights. This lender agreed to do a loan for 5 years knowing the risk perhaps far better than the borrower. We are all suffering from the financial market greed. Why should the borrower not be able to avail themselves of the protections afforded by the law. The fact this lender will not renegotiate the loan and will eventually throw these people to the curb makes them far more culpable. From the facts, the borrower has acted legally and ethically in AZ . To imply otherwise is not right. They have enough weight on their shoulders. Let them explore all options and seek legal advice with out pre-judging them.
Flag Wed Apr 25, 2012
I am going to also contradict those that say that you cant get a loan without a down payment. That is not true. Two such loans come to mind.

VA (Veteran) loans can be had for 0% down and the closing cost are rolled into the loan. The last two I worked on as the Buyer's Agent, the buyer paid less than $1000 total out of pocket because the lender we use does not hit the buyer with junk fees.

The second 0% down loan is from the USDA. The home must be located outside the densely populated urban areas, which means Queen Creek, San Tan Valley, Buckeye, etc.

Loren Hoboy-Realtor
Central AZ Real Estate
Your Local Expert
623-688-0004
LHoboy@centralAZhomes.com
0 votes Thank Flag Link Wed Apr 25, 2012
As everyone said you can not buy with no money down these days. Also lenders got wise to the buy and bail that people were doing. You would need to qualify to carry a mortgage for both homes in order to even qualify to purchase the second home. I assume your lender has addressed that with you already. As already mentioned there are programs out there to be able to buy a home if you are current on your mortgage. There are also lenders I know that will lend money at a higher interest rate for the 2-3 years it would take to get you into a lower interest rate once you qualify as long as the only payment you were late on was your mortgage and nothing else. My partner and I just completed 2 short sales where the seller had money to pay as the bank didn't want to take the home back and preferred to do a short sale, but they didn't have to pay one dime to get it done.
Best regards,
Lorrie Feld
Keller Wiliams Integrity First
480-570-1074
0 votes Thank Flag Link Wed Apr 25, 2012
I am going to address this to some of the responses. This home owner tells us their loan is about to come due and that based on the fact they can't get it refinanced (more that 125% upside down and they tried HARP). They also tell us that they can't afford more than interest only. So they most likely are headed towards a foreclosure, and a short sale is an option to consider. AZ is an anti-deficiency state. That means the lender can only get the value of the house and cannot pursue the borrower for the deficiency (if specific conditions are met-most important being that the loan was for the original purchase money; a refinance loan is different). So how the homeowner handles the situation gives them a number of options.

It is not fraud or unethical to consider your options to acquire a new home. For that reason I recommend that the home owner consult a real estate attorney that specializes in short sales and seek advice. I can make an attorney referral and provide more insight.

Please give me a call to discuss your options.

Loren Hoboy-Realtor
Central AZ Real Estate
Your Local Expert
623-688-0004
LHoboy@centralAZhomes.com
0 votes Thank Flag Link Wed Apr 25, 2012
I'm NOT going to get on the "fraud" bandwagon. The solution is in the details. What was missed here is that you are CURRENT on your payments. It is in fact possible to do a Short Pay. There are banks doing them, there are agents doing them as well. I have one such listing right this moment that the seller remained CURRENT on payments and had a hardship that would not allow them to continue to be current on payments in the future. We will have it closed in the next 2 weeks(less than 8 weeks total). The seller is currently in the process of applying for an FHA loan and I am 99% certain they will be approved. No money down be an issue. If you would like a FREE consultation I would be happy to provide one for you 480-382-8007

Best Wishes,
Bryan
Ask Bryan Realty Group
brokered by AZ WIDE REALTY
0 votes Thank Flag Link Wed Apr 25, 2012
It's fraud and it's unethical. Advice: Don't do it.
0 votes Thank Flag Link Wed Apr 25, 2012
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Wow, that's some advice. And it's fraud. Sorry, S., but you can't beat the system that way.
0 votes Thank Flag Link Wed Apr 25, 2012
The advice provided is incorrect and fraudulent. If you were denied for HAMP, I suggest you contact your lender and reapply. Ask specific questions as to why your application was denied.

Assistance programs are continuously changing and it is possible your lender may be willing to work with you in a modification or potential principal reduction.

Do not buy and bail. A house is not worth the potential consequences of strategically defaulting on the mortgage.
0 votes Thank Flag Link Wed Apr 25, 2012
Current on payments means the bank is not mad at you and that a short sale is not going to be possible. The bank requires a hardship, non current on payments, moving, loss of job, illness would all qualify. Just giving up and asking the bank to take a loss is just not an option. You can't just want to do a short sale, it does not work like that.
0 votes Thank Flag Link Wed Apr 25, 2012
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