You are definitely in a tough situation. Right now, if you stop making your payment on the second your lender could foreclose and your credit score will go down substantially. Since you owe more than the home is worth the first lender would receive all the money from a foreclose and the second would receive nothing. If you stop making your payments now on the second, the second lender could foreclose but they will receive nothing from the sale. Therefore, this option is not in your lenders best interest. You could call them up to see if they would do a loan modification.
In addition, if you don't want the house anymore, then you could list the home for sale as a short sale. A short sale is where your lender would agree to take a loss between the different of the purchase price and the balance due so the property can be sold to the new buyer. Approximately 50% of the market in Phoenix are short sales and the process is similar to applying for a loan. The short sale would come down to you being able to prove a hardship and based on your comments above I think you would qualify. I am a short sale specialist so please give me a call if you are interested in hearing more about how a short sale would work.
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Sean Heideman, Realtor
E-Certified, SFR Certified
2929 North 44th Street, Suite 320
Phoenix, AZ 85018
If you quit making your payments, any lender is going to start to foreclose regardless of whether you have been current in the past.
You may want to contact an agent in that area to get an idea of what similar homes are selling for along with a market analysis.
It would be impossible at this point to determine what pricing for your property will be by 3/13 so I guess you need to decide if you want to hang in there for the next 2 years to see if you'd be able to refinance or make a decision now.
If I were you, my first phone call would be to an attorney or accountant so you can go through all the "what ifs".
I have two suggestions:
Go to Zillow.com, put in your address and let us know what it says. It is by no means the same as an appraisal, but will give us an idea of where you really are in regard to LTV/CLTV and what your viable options are.
When you are ready, contact someone who can give you good legal advise:
Scottsdale Law Group, 15333 North Pima Road Suite 130 Scottsdale, AZ 85260 | 480.478.0709
Finally, what do YOU mean by "our Debt ratio is borderline"?
Bill Parker, Loan Officer
AZ Lic# 09011570
CPA--Licensed, no longer practicing
Legacy Group Lending, Inc.
15333 N. Pima Road, Suite 300
Scottsdale, AZ 85260
(O) 480-993-3080; (M) 602-565-3646; (F) 480-993-3081
MISSION STATEMENT: To create an unbelievably enjoyable experience for my clients, while guiding them through the most important financial transactions of their personal lives. My clients know me as their Mortgage Lender for Life. I truly appreciate your referrals.
If you think it's expensive to hire a professional to do the job, wait until you hire an amateur.
Red Adair, Oil well firefighter
You are a smart consumer for asking these questions. My question to you is this: do you want to stay in the house? If that is a priority for you, that will limit your options to loan modification and refinance. You will not be successful refinancing a 2nd or HELOC without equity. If your combined mortgage payments exceed 31% of your gross monthly income, most lenders will see that as a hardship situation and you may qualify for a loan modification under HAMP. To see if you are eligible for a modification or refinance option, go to:
Even if you don't qualify for HAMP, you can still request a loan modification. However, be advised that your lender may require you to go late on your payments in order to qualify for a modification. There will be damage to your credit with all options short of continuing without doing anything.
If you are not married to the house, you should still pursue loan modification. However, it will be difficult or impossible to get a reduction in the principal balance of your loan. In that case, a short sale or foreclosure may be your best option. Before you consider foreclosure, you should contact an attorney. The best and most affordable attorney, Ellen Lawson Attorney at Law, can be reached at 480-368-2700. She will give you a consult for $150 to assist you with determining your rights in foreclosure and also let you know what the banks can and cannot do legally.
I can provide you with a free short sale consultation. We do not charge any up front fees or retainers, and we are one of the leading foreclosure and short sale teams in the valley. Listen to our radio show every Friday 4pm-6pm on AM 1480 and give us a call on the air if you would like some advice. Or call us at the office. We've sold 98 properties in the last 12 months and we have a lot of experience helping people in just your situation.
You are in a tough situation and you really need to talk to your lenders, an attorney, and an accountant to determine your best course of action.