This is the absolutely best time to buy up to a more expensive property. If you can afford to keep your condominium as a rental and also buy, you are in a great position to take advantage of our still low prices and low interest rates.
If you have never been a landlord before, you will have to rent out your condo as a landlord for one year before you do not have to count the full condominium mortgage in your ratios for getting a loan on a house.
Other choices are, to sell and bring the $40,000 into closing or to do a short sale. To do a short sale, you have to have a hardship which means you write a letter to your current lienholder to explain that hardship. I doubt this is your situation since you are wanting to buy right now.
Prices have gone up about 10% year over year (2011-2012) in King county, so you might be smart to have a porfessional, experienced Realtor, do a market analysis for your property to see if you truly are $40,000 below current debt. If you are using an automated online system to guess your value, those can be way off.
I would be happy to do a detailed report on your value for you. You can reach me at http://www.karenmcknight.com . I have worked the Kirkland area for over 20 amazing years.
My advice is to look into refinancing as "Investment Property" to lower your payment and be eligible to go buy an "Owner Occupied" property in the next 12 months. If you refinance your condo as "Owner Occupied" and want to buy a new home less than 12 months you'll be subject to buying the new home as "Investment Property".
If you shortsale- you can't buy for the next 3 years...keep in mind the shortsale process can take up to 1 year+, credit score will drop, bank may not approve you to shortsale if you can afford the payments. Shortsale is not a tool to walk from property because you owe more than it's worth, it was a way a year ago but the banks for obvious reason are taking further measures to protect their bottom line.
Here is a very important piece - if you need the rent income to qualify to buy a new home then you need to get a renter in the condo before the end of the year. Show at least 1 month of rent on the 2012 tax return. If you fail to do this, you'll be subject to "buy n bail" and at that point you'll need 25% equity in property to use the rents received. This is not the ideal "go buy a home scenario" but if you have to rent yourself or move in with family to use the rent income, then that is what you have to do.
1- Short sale it now & rent or buy after.
2- Rent it out now & go buy.
3- Rent it out, go buy, then do a short sale.
If you would like to discuss in detail these & other options, fee free to call me any time. I consider myself a consultant & have lots of experience with all of these options.
Good luck to you in any case,
Isaac Real Estate Team
Champions Real Estate Services
TriStar Finance #MLO-107799
Office: 425-483-6849 Cell: 206-841-9976
Winner of Seattle Magazines 5 Star
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Read this: http://blogs.kirklandreporter.com/realkirkland/ I have been completely overwhelmed by how busy the market has been in Kirkland the last year and even though it has slowed just recently, prices have slowly continue to go up. Do we know if that will sustain? Hard to say. But I would bet that it won't get worse. Kirkland is a desireable area and values are slowly but surely increasing. I just don't think it's likely that you'll make up $40k + on a condo in the next year.
I would advise renting it out or writing the check and getting out of it IF you have a specific home in mind that you absolutely love, you have to move on it now, and plan on living in for a long time. If those are not options, then it sounds like you need to keep living there for a few years until the market fully turns around.
Hope this helps,
I don't know how much actual money we're talking about here, but if you think prices are ever going to go up, my suggestion is - if you can swing it - write the check and sell the condo, then buy the house - even if you have to go minimum down. The mortgage insurance is a pain, but interest rates are so low that I think it's worth it.
All the best,