How long a foreclosure stays on your credit report is a different issue than how long it will affect you. It can affect you forever. Creditors can ask: "Have you ever had a house foreclose?" and if you answer falsely, that's fraud and possibly even criminal. As to such a question being asked, just yesterday I saw a relocation addendum where the buyer had to verify that they'd never filed a bankruptcy. Never is far longer than the 10 years a bankruptcy stays on your credit report (absent death interceding).

Also, whatever Freddie, Fannie and FHA requirements are right now regarding prior foreclosures, there's no guarantee that those won't be stricter in the future (although they could also become more lienient too).

Sorry I typed to fast on my previous post, here is the correction. Have a local Realtor do a cma on your current home then get back to us.

Hi Chris,

Question, does your new company have any relocation benefits for you? If so, that might help you in your decision making. Sometimes depending on the benefits, you can negotiate some of the complexities that you have mentioned ( Prepayment penalty, etc. ).

If you decide to rent out your property, which I agree and know Steve. That is your best choice even if it is a loss. I know a great rental company to conduct a background checks and screenings of any renters. She is amazing and will do the walk through and everything with the renters. It is very extensive and is a one time fee of 50% of your first months rent. If you manage your property on you own, than that is no additional cost to you. Considering your square footage of your home, you are most likely going to be taking a loss each month. Though, it is going to be a huge benefit to you.

If you choose a Short Sale your credit score will drop between 150-200 points, a Foreclosure will be 250+ points. The Foreclosure will stay on your credit report for 7 +/- years / Short Sale will be reported as " Settled Dept" or " Paid at less than full consideration" . There are a lot of complexities to your decision and you should think very carefully about any decision that you make. Yes, talking to a Real Estate Attorney would also be a very wise choice as well. If you would like the name of the rental management company and the person that I would recommend, please drop me an email. She is very familiar with the Marysville area.

The best to you,
Natalee Thurston

Chris,

You have a tough decision to make. I would recommend to rent it out, the foreclosure option is an expensive one. It will effect your credit which will not only make it more expensive to buy your next home. For examaple the current mortgage rate is around 5%, because of a foreclosure, in the future 1-2 years before a lender will lend money to you to buy again you will pay 1-2% more in interest rate. The current rate is 5 but you will pay 6-7%. Your insurance on even your car will go up, because your credit score went down. Anything you want to buy on credit will most likely cost you more also, because of your lower credit score.

Rent the house out for whatever you can, Going to Eastern Washington usually has a lower cost of living that in combination of your higher income to make up for the difference in what you get for rent and your current mortgage payment. Stay current on your mortgage it will cost you less in the long run!!


Steve Halvorson

Chris,
I think you best option is to try and do a short sale. I agree it might be a tough sell to the bank considering you are current and your new job, but it is worth a shot. You can stay honest and still prove that this will be a hardship on you and your family and one that is not sustainable long term.

Katy's post raises an issue that I hadn't thought of.

With a first and second chances are that if the first forecloses you'll end up still owing money on the second. The same is probably true of any short sale. That's one thing I never liked about the 80/20 loan packages, but most people went with the lower payments of an 80/20, even if they knew the increased risk.

As mentioned, that is something to discuss with an attorney.

This is a question that you really need legal advice on because either a short sale or a foreclosure will have legal implications, including possible tax implications. (I'm assuming this is a short sale based on your area and the refinance appraisal--which tend to run high).

If you do rent, you'll most likely need a local company to handle that, so it might be best to locate one, see what they think they could rent your place for, and see what they charge.

One thing to keep in mind is that the foreclosure will always be on your record, even after it drops off your credit report, in that it's a matter of public record and lenders can ask have you EVER had a property foreclosed. And current standards on making loans to people with past foreclosures might not be the future standard. So it will not be possible to determine precisely how either a foreclosure or short sale will affect your ability to get a future loan.

You should consider consulting with an real estate attorney who is familiar with short sales and foreclosures. Since you have a second, this could impact the final outcome of your liabilities. Also, you might consider talking to a CPA (if you don't already have one) to see if you would qualify for a tax write off of the loss you will take on your taxes by renting your home.

Here are some of the answers to the questions asked:

Built in 1968, .23 acre lot, single car attached garage, painted exterior 08/08.
Central Msvl, just off 88th street, East of I-5.
Haven't yet decided on living arrangements in new city... likely rent for a bit and save up to eventually buy another house.
Also, not sure off the top of my head what the prepayment fee is.

Thank you for all of the great responses!

sales of homes in marysville between 1000 and 1200 sqft in the last few months have ranged between $145K (4 bed / 1130 sqft / 1970 built / .23 acre lot) to $240K (3 bed / 1144 sqft / .10 acre lot / built in 2002).

Your appraisal from March 2007 isn't valid nor is it indicative of anything today.
There are pros and cons to all your options.
Short Sale: .... how are you going to explain to the bank when you've made all your payments up to now and you now have a job that pays 5x more ...that you can't afford to pay them back their loans. I don't think the bank will buy into that.

Rent: ...you're going to take about a $600 to $700 monthly hit ... rents in Marysville generally aren't hitting $1 per sqft ..so you're looking at rents at about $1000 ... maybe more if you have a huge lot or something else unique/special about your property. Being an out of town homeowner renting a house out, you're going to have to place a lot of trust into your property manager and will also have to pay them. ...so you're monthly hit will increase by probably an average of $100 per month. (often 10% of gross rent). See how much you owe on the pre-payment penalty and figure out how many months of monthly losses would it take to match.

Foreclose: ... kinda like the short sale...it'll be a long time before you actually get foreclosed on and that will put a nice black mark on your credit for a while.

Question... why don't you refinance your loans asap? I just ran your $247K with recent rates and they are all significantly lower than your $1700 ..unless you're counting in taxes and insurance as well. ..Though taxes should be around $200ish per month... which puts my numbers in the $1500 range ... what's your interest rates on your loans? hmm... let me think about that one.... talk to a lender about what you can possibly refi into right now considering market value is likely less than what you owe.

Going back to the renting thing... in my opinion... if you screen the applicants well, you minimize your risk of having a bum tenant which in turn minimizes the headaches of owning a rental house..regardless of where you are. ...but it goes back to how much $ you can take a hit on.

Another possibility is to put it out there as a lease to own property..

for more accurate pricing... in addition to what I asked about already....
garage?
lot size?
which part of marysville are you in ? .. east / west of I-5? ... north end / south end?

Chris,

In my professional opinion, I would say you first need to contact a local real estate professional. If you need a referral I can do some searching for you.

Secondly, I would assume that shortselling your home would probably help you the most. Renting a home in your area would most likely not bring the motnhly payment you need, including the headache of being an absentee owner. Allowing your home to go into foresloure is never a great option.

Pre-payment penalties are generally a low dollar amount, and paying them is better than ruining your credit be defaulting on you loan and being foreslosed on.

Contact me for further information on my suggestions at osheamatt@palincoln.com

Few more bits of info would be good..
how old is your house?
how much is the prepayment penalty?

Sorry, It is a tough time for everyone. Congratulations on the job. What are rents in your area? Are you planning on buying a home in your new city? When?

Have a loal Realtor do a cma on your current home then get back to us.