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Olly, Home Seller in Sterling, VA

Bought Townhouse in Loudoun in 2005 for $375K, curent value ~$210K, owe $285K. Buying a SFH for $350K in

Asked by Olly, Sterling, VA Sat Feb 21, 2009

fairfax and moving there. 1) Rent townhouse ($2000 mortgage-$1500 rent), or sell it (and make up for $65K loss) 2) Since I will be taking a second morgage, how hard is a short sale for the town house?

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The first thing you need to do is contact your lender. If you are qualified to buy a second home they may not look favorably on a short sale of your townhouse. Some homeowners who attempt a short sale find out that because it was an investment property or because they bought a another home that their lender won't let them complete a short sale without triggering either an unsecured loan for repayment or tax liability for tthe difference between the short sale amount and the market value.

Short sales require that you provide evidence a financial hardship including tax returns, investment accounts, recent pay stubs, etc. They won't even consider a short sale unless you are behind in your payments which of course will lower your credit score making it harder for you to get the loan for your new home. Call your first lender before you commit to a new home.
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1 vote Thank Flag Link Sun Feb 22, 2009

I have done and am doing many short sale and live in Sterling VA.

Here are few things and a bottom line that you should consider as far as my experience goes ;-

If you plan on keeping the house you have and renting it ;
In a recent check with similar situation of my clients Lenders Wells Fargo and Suntrust wanted them to have A) Twelve Months of Mortgage Reserve on their current house that they will be renting - menaing - $24000 for your case
B) 4 months of Reserve on New house- assumming your SFH payments are $2500 X 4 =$10000
C) That means having $34000 Cash in Reserve and then Downpayment and closing cost for SFH
D) Then you should also qualify 40% Debt to income Ratio on conv. anf 50% on FHA

If you plan on short sell the house -

It can be done but as far as I am aware you have to wait 2 Yrs. to buy next home and do the right things to build your credit. .
Some of my clients are coming close to 2 yrs of short sale so I would know in real time but so far these were the guidlines I was told. Short sale Only on the credit of the BORROWER not the person on the deed.
I will know better if I know your situation in detail but with the info given here I feel you may want to discuss option with right people before you take your next step.
BTW if you have not owned a home on last 3 years you are considered first time homebuyer.

703 626 3327
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0 votes Thank Flag Link Sun Feb 22, 2009
Cindy was right on with her advice to contact a lender.

New lending restricitons make it difficult to purchase a new home when counting on rental income from your current property. The reason being they don't want you to short sale/foreclose on the old property once you are happily settled in the new property. Only a loan officer can determine what programs would meet your current needs.

It is a great time to purchase real estate, if you can hold on to your current property as well - you will be well positioned for when prices rebound in the future.
0 votes Thank Flag Link Sun Feb 22, 2009
I agree you should talk to your lender. I know some lenders will re-negotiate the terms of your current loan, to lower your monthly payment, that is the first thing you should try, as you could lower the payment to be more in line with the rental income. That way you can protect your credit and hopefully buy the new home you want. Most townhomes in Loudoun are renting from $1400 for the 2 bedroom 1 bath homes, up to $1750, (and more for the larger newer homes)... But short sales take 2 to 6 months to complete. The lenders may send you a package that detail what you have to submit for a short sale. If your lender does not have these packages, then some of the short sale negotiators will provide you with a packet. Try asking Consumers First Title in Loudoun for their packet).

It is important for you to keep your credit score up, so that you can purchase a new home for the best possible rates.

Good luck.
0 votes Thank Flag Link Sun Feb 22, 2009
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