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Am I being realistic, also any fine print to be aware of with FHAs

We are short-selling my husband's townhome. Together we bring in $6k each month but we haven't been able to save because of how much the townhome costs each month. I have an acre of land that we hope to build on in the next 2-5 years and I do have a $27k mortgage on that, so technically I am not a first time buyer if that matters. Anyway, we need somewhere to live in the meantime of course and want to save up as much as we can.

Ideally we would like to buy a really inexpensive fixer-upper home to live in and flip, we are looking for no more than $70k. Our monthly payments would be less than $500 which is more than half of what renting would be. We could either sell it when ready or use it as supplemental income as a rental.

Realistically we can't pay more than $5k at closing. I know that's really really low, but if we were only paying a few hundred a month we could easily save $1000+ a month. We have the income and I have really good credit (he won't of course after the short sale).

Does it sound even feasible, this situation? Are there any caveats I need to be aware of, for example sometimes you can't sell for 3 months (which isn't a concern of mine as it will be owner occupied). If there are other options available that I'm not aware of please let me know as well. Thank you for your help.

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November 04 2012 - Chicago
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Profile picture for wetdawgs
If you are short selling the townhome, you will have to have documented financial hardship to qualify for the short sale (and that is likely to include examination of other assets).    Usually after a short sale, one has to wait two or three years to qualify for another mortgage.  

Why not rent for a few years to realize your dream?   While monthly payments may appear to be more, when one starts including the costs of buying and selling plus maintenance into the calculation the difference may not be as big as you think.

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November 04 2012
Profile picture for user479209
Thanks for the response.

I am not on the loan or title for the townhome and my income is not a consideration in the shortsale. We do have a hardship.

Renting would be $1000+/mo, owning would be <$500/mo with the ability to turn it into extra income or sell it and make $20k or more if we play our cards right.

If we bought we could easily put $500 a month into updating/fixing and have it good as new in a year or less.

My husband has built and remodeled hundreds of homes in his life so he is a seasoned professional to this.

It's a no brainer to me to buy if we can.
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November 04 2012
Profile picture for user479209
Also from what I've seen, renting would be more like $1200-$1400 and a monthly payment could be as low as $300 or $400. So if we did put $500 a month into it (and really, depending on what was needed it might not even be that much) it would still be significantly less than renting. Plus we would get something out of it in the end. Just trying to understand the risks of a low down payment load.
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November 04 2012
Profile picture for wetdawgs
You will have to qualify on your income alone, including your debt load (the mortgage on the land). 

A 5% down conventional mortgage will carry mortgage insurance, but may be a possibility.
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November 04 2012
any new property purchased within 90 days of completion of a short sale may be subject to a lien to offset any losses the lender incurred by allowing the short sale for less than owed

here after the completion of a short sale, with 20% down, one can buy another home at current market value within 1 day of completing a short sale otherwise you'll have to wait 12 - 24 months to receive FHA financing again
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November 04 2012
Profile picture for user479209

I appreciate the advice on the short sale however the short sale has nothing to do with this situation except that we are paying a lot of money each month and are unable to save any due to that as well as some other debts my husband has incurred - so I am looking to live significantly below our means the next few years. The short sale is under his name and only his name, my name is not attached to it legally or financially. My husband will not be attached to any house we buy next, if we go that route.

I am looking for information on FHA loans or other options for low down payments as I have never bought a house before and this market is nothing like anything I have seen (my mom is a realtor, since the early 90s).

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November 04 2012
This is a subject that should make people angry!!!

I represent many people who have terrible hardships and have to jump through all kinds of hoops to be able to short sale their homes. They have no other assets to depend on after the fact.


Not being able to save any money is not a reason to do a hardship .... not a reason for you to be able to sell something for which you do not wish to pay.

Your husband bought the town home knowing the payment. If the income has not changed to your detriment, or the payment has not increased to your detriment, you should have no hardship.

If you were not married at the time of purchase, but are now living in the property, your income may (and should) be considered in the hardship.

If you have to sell the home and take a loss, you will be joining million of others doing the right thing. Otherwise the rest of the Country will be paying for your default.



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November 04 2012
 
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