i am upside down on my mortgage how do i fix it or get out of it an in a new home

Asked by Joe Tarck, V. M. Ybor, Tampa, FL Sat Aug 17, 2013

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Fred Yancy, Agent, Woodstock, GA
Sat Aug 17, 2013
Before you eagerly climb aboard the short sale bandwagon, consider the following to determine whether you may qualify for a short sale. If you cannot answer yes to all four requirements, you may not qualify for a short sale.
â—¾The Home's Market Value Has Dropped.
Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. This unpaid balance may include a prepayment penalty.

â—¾The Mortgage is in or Near Default Status.
It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems at the pass.

â—¾The Seller Has Fallen on Hard Times.
The seller must submit a letter of hardship that explains why the seller can not pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

A few examples that do NOT constitute a hardship are:
1.Bad purchase decisions.Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.
2.Unhappy with the neighbors.Even if every home on your block has turned into pot growing houses, that will not qualify as a hardship.
3.Buying another home.The lender will not care if you have decided the home is no longer suitable for you or your family.
4.Pregnancy.Increasing the size of your family or starting a family is not considered a hardship.
5.Moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to abandon your home.
Examples of hardship are:1.Unemployment
2.Divorce
3.Medical emergency / sudden illness
4.Bankruptcy
5.Death

â—¾The Seller Has No Assets
The lender will probably want to see a copy of the seller's tax returns and / or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the seller has the ability to pay the shorted difference. Sellers with assets may still be granted a short sale but could be required to pay back the shortfall.

For example, if the seller has cash in a savings account, owns other real estate, stocks, bonds or even IRA accounts, the lender will most likely determine that the seller has assets. However, the lender might discount the amount the seller is required to pay back.

Many entities profit from short sales, but there is no seller short sale profit.


Short Sale Consequences

A short sale is dependent on a buyer making an offer to purchase. If you do not receive an offer, you will not qualify for a short sale. So even if you meet all the other criteria, it is possible that no one will buy the short sale. It is also dependent on the lender accepting the buyer's offer. If the lender rejects the offer, a short sale will not take place.
â—¾Tax Consequences
If the lender agrees to the short sale, the lender may possess the right to issue you a 1099 for the shorted difference, due to a provision in the IRS code about debt forgiveness. Many situations are exempt from debt forgiveness, according to the Mortgage Forgiveness Debt Relief Act of 2007.

You should speak to a real estate lawyer and a tax accountant to determine the amount of short sale tax consequences, and whether you can afford to pay those taxes, if any.

â—¾Blemished Credit Report
While a short sale will not show up on your credit report, the loan status will. For those in default, it's a pre-foreclosure that has been redeemed, which is often reported as Paid in Full for Less Than Agreed. Short sales affect credit ratings. While the damage to your credit report may not seem as significantly bad as a foreclosure to you, creditors may not make the distinction.


Always seek legal counsel before attempting to pursue a short sale. A real estate agent cannot give you legal advice.
1 vote
Melissa Goss, , Center Moriches, NY
Thu Aug 22, 2013
If you do a short sale, which may be the only way out- you will not be eligible to get a loan. Unfortunately there is no good answer here for you, no easy way out. And you are not alone in this situation.

You can short sale it, but then you will be at the mercy of either living with family or friends till you fix your credit, or you can try to find a landlord willing to rent a home to you
0 votes
, ,
Thu Aug 22, 2013
All good answers but re-read Fred Yancy's comments. If you do a short sale, forget buying another house for 3 years. It's the same thing as a foreclosure but allows you to walk away with dignity.

Otherwise, read Rodney's answer and see if you qualify to refinance the house. Even if upside down, there are programs for that. They don't all work but it's worth a try.

Gary makes a good point too. Instead of renting, do a lease purchase. Same thing basically, different wording. It means the buyer (not a renter) pays for repairs of the house because they are making payments to buy it until they fix their situation or until the value comes back. In Tampa, you may not have to wait long as Florida is now one of the fastest in the country of bouncing back.

I'd still look at the refinance to lower the rate if possible so that you can maybe break even on the rent or lease option.

Lastly, there is another way. It's a little more work but if done right, you can pretty much walk away from the house without hurting your credit and still get another home.

Depending on your current employment, there are some programs still out there that offer stated income loans or high debt to income ratios.
0 votes
Gary Geer, Agent, Antioch, IL
Sun Aug 18, 2013
Joe Tarck,
A short sale may be your answer as others have posted. Another answer may be to rent your home with an option to buy at a later date. Hopefully the rental may cover your mortgage payment and other expenses. Renting your home is not for everyone though. Tenants will very rarely take as good of care of your property as you would and management can be a nightmare. I would talk to a real estate attorney prior to going that route. I wish you all the best.
0 votes
, ,
Sun Aug 18, 2013
A Short Sale is when the bank/mortgage company agrees to accept a payoff of less than the current balance owed on the mortgage account. Generally, the seller must demonstrate a financial hardship (i.e. job loss, serious illness or death of a primary wage earner, and sometime, divorce) to be able to qualify for a short sale program. A decline in the property’s value would not be an acceptable reason alone for a Short Sale Approval. Acceptance by the seller’s mortgage company often takes weeks to months. If there is a 1st and 2nd mortgage, both mortgage companies would have to agree to the final terms.

If you have a Fannie Mae or Freddie Mac loan, then you might be eligible for a HARP Refinance on your 1st mortgage. If you would prefer to keep you home, you might want to explore this as an option. To do so, you can submit a request online at http://www.rodneymason.com. There is no celling on how upside you are in the home for a HARP Refinance.

If you have any late on your mortgage in the 12 months preceding the completion date of the Short Sale, then an FHA mortgage will require that at least 36 months must have passed. A Conventional mortgage will require a 24 month waiting period and a 20% minimum down payment. If you are an eligible veteran, then a VA mortgage might be possible after 24 months or after 12 months with extenuating circumstances.

You could look at keeping the property and renting it out until the value returns. This would help to offset some or all of the mortgage payment.

If you decide that a Short Sale is the best option for you, then working with a knowledgeable and seasoned Short Sale Listing Agent is critical in today's market.

Regards,
Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
rodney.mason@prospectmtg.com
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia with over a decade of mortgage lending experience.

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203(k) Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle® Renovation | VA | USDA | GA Dream | Jumbo Financing.
0 votes
Latonija Bro…, Agent,
Sat Aug 17, 2013
You do have several options for dealing with your upside down home. However, a short sale may be one of your better options at this time especially since the Mortgage Forgiveness act was extended through the end of 2013. Each person's situation is unique and as such I would suggest that you schedule a counseling session with a knowledgeable real estate professional. You need to partner with a professional who can assist you with an overall long term plan to meet your real estate needs. If you have further questions or to schedule a free consultation, please feel free to contact LaTonija Brown at Brownstone Properties via phone at 888-767-4423 or email at brownstoneproperties101@gmail.com
0 votes
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