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Buying a new home when underwater

My wife and I bought our townhome in 2008 for $290,000 and at best could sell it for today for $220K.  We have outgrown this home and also for other work related reasons, we need to move within the next year or so.  Under ordinary circumstances, we'd be looking at home in an area that we would buy a property around $400K.  We can easily make the payments on that new property with current income.  Within this timeframe, we will have saved enough for over 10% downpayment, but not nearly 20%.  
   I clearly understand that we need to talk to a loan officer for fine details, but I'm just trying to see what general options are out there for someone in this situation.  What am I most likely to be qualified to pursue?  Keep the current home and rent it out (will cost me a couple hundred a month at current rental prices) and buy the new one?  I assume I can't roll our loss on this home into the new loan?  What other options do we have?  I know many people are in this situation, but sometimes people have to move, so what do they do?
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June 24 2013 - Somerset
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Answers (2)

Here are a few options.
1. Rent it out with a reputable management company. You will continue to build your equity even if it costs you a few hundred dollars per month. You may even recoup that if you sell it in a few years with an improving market.
2. Put on market with a lease option to purchase. This could allow you time to save for some of the difference and keep it rented in the meantime.
3. Take the loss and find cash to bring to close for the difference.
4. Short sale, Deed in Lieu, Foreclosure. You would likely have to rent for a few years after one of these but they may also provide you options. If you are considering any of these you should absolutely speak with an experienced attorney or an experienced Realtor with CDPE and/or SFR designations.
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June 24 2013
Hi,

I understand your situation.  Many people are in it.  I would love take a look at the comps in your area see what is the max you can get for it and also would love to take a look at what you can get for renting it.

I definitely would recommend speaking to a mortgage rep about the mortgage situation...they would give you a general idea and details of the situation for your better understanding and comfort.

I would love to help in any way I can.  The market analysis is free so no obligation.  I work in Somerset, Morris county areas. Please email me at [Email removed by Zillow moderator]

Thank you and look forward to hearing back from you.

Melissa Silva
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