Home Selling in San Diego>Question Details

Kristi, Home Buyer in San Diego, CA

I am wanting to buy a home, but have a condo that has depreciated significantly. Because of the condo, we

Asked by Kristi, San Diego, CA Thu May 15, 2008

can only qualify for a home worth $380k, which won't buy us what we need in the area we want to live. We currently owe $325k on the condo and the comps in our complex are going for $220k due to foreclosures and short sales. I am toying with the idea of selling the condo for $220k, and try to get a personal loan for the remaining amount. Then, I'm hoping to qualify for a larger sum for a house. Any advice? Is this a good strategy or should I just keep plugging away at paying the mortgage on the condo?

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What you qualify for is based on total monthly debt payment divided by total monthly gross income. Getting a personal loan would actually hurt you (in this objective among others).

Your loan on the condo is probably a 30-year loan. Let's assume no interest for the moment. $325K / 30 years = $10.8K / yr. A personal loan would probably be calculated at 5 or 10 years. (Let's say 10). $325K / 10 years = $32.5K / yr. So, you would be required to pay more each month. That increases your total monthly debt payments which in turn will reduce what you would be allowed to borrow for a new property.

Your interest rate would also be substantially higher because a personal loan is not secured by real property.
1 vote Thank Flag Link Thu May 15, 2008
Hi Kristi I sympathize with your situation.
First of all, considering a short sale is a extremely bad idea from a credit stand point which will obviously affect your qualification for a loan. Ask any lender or do a search on the effect of a short sale on your credit and you wil find that it is almost as bad as a foreclosure and stays on your record for 4-7 years.
What you didn't mention was, the type of loan that you have...30 year fixed or others...
I would not advice getting a personal loan for a down payment....they are very expensive
From a home purchase stand point, consider your job security first before making the leap. It is very tempting to move up into a larger of better home in markets such as one we are currently in. My biggest concern would be that over leveraging yourself can lead you into more trouble. You should ride out your current situation, be patient...markets do change you know....
0 votes Thank Flag Link Thu Jun 5, 2008
Hi Kristi!
One third of the value is tough to swallow. Some questions. Are you the type to atone over and over for
imagined sins? Will you beat yourself forever if you short sale (even if you pay off balance) and then
the market returns with a vengence and you lost that investment? Or, are you loaded with cash and very
devil may care? Can you stomach taking your loss, never look back and move on? That's the first important question.
Secondly, you may not qualify for that bigger mortgage in this climate with guidelines tight and the required down payments growing larger. Be sure to get a loan committment from a lender in place and one that you can renew the "lock" on the terms in case you can't sell the condo. It's never exclusively about
money if it's your home you are talking about.

Could you rent the condo? Then you could do a 1031 exchange later
into something income producing. What is driving you? Examine your motivations. Then talk to a lender.
0 votes Thank Flag Link Thu May 15, 2008
I agree with Michael. Have you considered renting it out? The number of renters looking for housing is increasing due to the huge rate of foreclosures. The people who have lost there homes have to live somewhere. Renting may be an option to consider. If your mortgage payment is more than the rental rates for your area than my suggestion would be to just stick it out in your condo.

Most of the people I know, including myself have a house worth less than what I bought it for 2 years ago. What ever decision you make, hang in there. Remember the market is cyclical.
Web Reference: http://www.abellre.com
0 votes Thank Flag Link Thu May 15, 2008
Upgrading in your situation is not a good idea. You are going to lose 105K by upgrading. Keep the condo, enjoy it, that's why you bought it, right? Maybe in 5-10 years the housing market comes back, and you can sell your condo and buy a house.
0 votes Thank Flag Link Thu May 15, 2008
You are in a difficult, though, not uncommon situation. You could try a "short sale' (See my link on short sales that follows). http://www.chicagotitlesd.com/december05/ShortSales.pdf Since you seem to be an owner occupied property, you would not have to pay for debt forgiveness (1099 IRS Form). Condos, unfortinately, again are in excess, though, yours may be a more entry level one and therefore more appealing to buyers. You might contact your lender to ask for a note modification or forebearance ( see following link for information). http://www.hud.gov/foreclosure/index.cfm
I can refer some excellent Realtors to you if you decide to sell via short sale. You could talk to an attorney about whether you should try the personal loan to protect your credit. The real estate market will eventually turn around, so keeping your condo as your home may also be advisable. Please call me if you want to talk more about this.
0 votes Thank Flag Link Thu May 15, 2008
Hi there Kristi, Have you considered renting it out? This way you are holding an asset. You should talk to a professional lender about your options.
If you need a really good one please let me know
Kind Regards
Michael Barron
First Team Real Estate
0 votes Thank Flag Link Thu May 15, 2008
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