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I need to get a bigger house. My house is upside down, can I short sale and buy another house now?

I have a nice home but we outgrew it.  I pay my mortgage on time and have decent credit because of it but my home is upside down about 100,000 and in no way will sell.  I would like to know my options besides bankruptcy.  I have worked to hard to keep my credit good but Im not spending the next 10 years hoping the market comes back paying on a house that is not worth it and I dont plan on staying in.  Can anyone help me out?
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January 24 2012 - Rita Ranch
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April 03 2013
Owners who have had a foreclosure 2 years ago just got approved to buy a new home.  According to their site [hotlink deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines] you can qualify one day after a foreclosure or short sale.

They have a program called Flexible Credit Loan which seemed too good to be true, but I have heard that many got approved and now have a pending offer, even after the short sale less than two years ago. Big banks said it could not be done.

Obviously it can.
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March 28 2013
Junior - Arizonans across the state are in your exact position. Bankruptcy is not your only option, and based on what I have read, you definitely have other options. Due to your cash-out-refi in 2006 you really need to sit down with a real estate attorney in person or over the phone and get the answers to your specific situation. Many firms offer free consultations.
You really want to find out: 1) how much if any of the cash-out-refi are you going to owe; 2) what tax consequences; and 3) what happens to your credit. While asking for general information is good, you are only going to get general answers. Your specific situation requires specific answer. -- In general I would agree with most of what has been posted here, specifics could change that.
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January 26 2012
Like shasta_steve said, FHA will allow you to purchase a new home immediately after a short sale, as long as you
a)never missed a payment
b)had a valid hardship
c)don't have a deficiency after sale.
d)still have an acceptable score....a short sale could knock off 75 points...

Who is your current lender?  if it's one of the big mortgages, there's a good chance you could get out, if it's a local bank or credit union, they may try to stick you with a deficiency.  

Ultimately you need to talk to a local Realtor about specifics.  
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January 24 2012
This question is exactly what created the Real Estate bubble we are all facing right now. You NEED a bigger house but your upside down on your mortgage???? To me it sounds like you NEED a smaller house?
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January 24 2012
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Lynn, yes she brought a son with her into this marriage whom I take on as my own.  So yes that scenario is true if that helps qualify for a hardship. 

Barbie, I was thinking that as an option to rent out the property.  The only thing I worried about is that now for my area to cover my mortgage it would be somewhere around 1400 a month and I dont think I will be able to rent it for that.  I will see what I can do but that is another option thank you for the advice.

Kevin, I tried that number and it is unavailable for my area or out of order, they gave both options but basically said its not working :).  I have several people who are realtors in my area but if they hold all the knowledge I will never know if they are full of crap leading me down a wrong road or telling the truth.  In the end it all comes down to money for most people on this planet and its hard to find one that just wants to help you out.  Even friends :).  I will make some phone calls in town and see if all the apples line up though like Barbie said as well.



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January 24 2012
"There are some provisions in short sales that allow for moving due to needing more space and /or new job that's far away. You should call a realtor in your area, the foreclosure hotline at 877-677-7622 and always get legal and accounting advice. You just might be qualified if your circumstances and type of current mortgage allows. You're welcome to call, text or email me anytime too."


Learn something new every single day. Very interesting.
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January 24 2012

If your wife has enough income and good credit then one solution might be to purchase a new home with her as the sole owner. If your credit and income is good enough, you might be able to buy as well. Those options are available then you open up a world of possibilities. Let me talk about those for a bit...

If you feel comfortable with being a landlord, you can rent the property. You have the option of either managing the property yourself or hiring a property manager. In my area a fee of 10% of the rent is charged for this service typically. Property managers can be excellent professionals or awful scumbags, so be sure to find a good one.

Of course, "talk to the right professionals, as in several, including an accountant"... but a few things for you to consider: If your home is an investment property in the future, and you actually hold on to it long enough you might have to pay capital gains taxes, OR you might eventually gain enough equity to be able to leverage this home to pay for a 2nd, 3rd, or 10th rental property. In the future home prices will eventually rise, if for no other reason than inflation.

If you are not able to break even with your rent vs. the mortgaged amount plus expenses, you can claim this as a loss on your taxes. If you're in a higher tax bracket this could bump you down to a tax rate that makes this feel not so bad.

I've found frequently that even very intellegent people who have not had experience with investment property are overly hesitant and afraid of what they don't know. This may be a good opportunity to educate yourself and your family about the experiences related to owning rental property or rent to own scenarios. Your current home might not be generating positive income or equity in the immediate time frame, but the experience could teach you enough to set yourself up for future successes and build confidence.

Keep an open mind, stay motivated, be positive about your situation, and be sure to maintain your credit.

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January 24 2012

Hi again Juniorferg, the fact that you recently got married can help you for the need to move? By chance does she have any children that would also add for the fact that you've outgrown home? As that could possibly indicate a hardship. When you took out monies from your home it will depend upon what you used the money for; for example was it a necessity for living expenses or was it for the ability to add assets? If it's the latter, you'll likely be looking at having to do some type of contribution to complete a Short Sale. If you have assets now; such as, money in the bank and investments again you'll likely be asked to contribute. Of course, the requested contribution can be negotiated. Good luck

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January 24 2012
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You guys are great!  All good info and let me give some more to help out the conversation. 
I guess I do not consider myself a hardship at all.  I am able to pay my bills just fine.  I have a loan that does not allow me to go under 6.85% and I cant refinance because of where the housing market is in my area.  With all that being said my family is growing and we need more acreage if at all possible.  I am the only one on my house note and I just got married in June so my wife is not on the house note at all.  Not sure if that makes a difference except that she can be put on the new house note as primary if needed.  One problem that I have read from you all is that I did refinance in 2006 and I did take a sum of money out on the property.  That could be a problem.  I am willing to help sell, rent to own, or whatever else is needed.  I really know absolutely nothing about real estate otherwise I wouldnt have taken money out right before our country went into a recession :).  Im looking for any info that can help me get out of this house and into another house.  If it damages my credit or I have fees so be it just need my options on the table really.  Thanks again for the initial ideas.  Contacting someone might be my only tool but I would like the info, I dont trust a whole lotta people when it comes to finances now a days.
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January 24 2012
Hi Juniorferg, from what you indicate it's unclear as to whether or not you would qualify to sell your home as a Short Sale. There are many variables that would affect your ability to sell your home.Depending on that, it would determine if you'd need to contribute to the sale of your home in the form of a cash contribution or promissory note or possibly, no contribution. Again, further details would have to be known. I do specialiaze in Short Sales and if you're in my area of South Florida, I'd be glad to help you further. Best of luck.
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January 24 2012
There are some provisions in short sales that allow for moving due to needing more space and /or new job that's far away. You should call a realtor in your area, the foreclosure hotline at 877-677-7622 and always get legal and accounting advice. You just might be qualified if your circumstances and type of current mortgage allows. You're welcome to call, text or email me anytime too.
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January 24 2012
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Well I can only tell you what your legal standing is in Arizona and my opinion on your short sale. 

Arizonia is one of the best states from a homeowners point of view in situations like yours.   As long as your house is on less than 2.5 acres and your loan is all purchase money then you don't have to worry about the bank coming after you as your loan is non-recourse.    This is true even if you refinanced to a lower interest rate but did not cash out. Banks may be more likely to grant a short sale in a non-recourse situation.   

As far as a short sale about the only way you could buy immediately would be if you were allowed to short sale without going late and then only if you went FHA.  It is going to affect your credit but maybe not by that much.  It is very difficult to get a bank to allow the short sale if they still think you are able to pay.   If you are late on your payments then you would have to wait two years to get a conventional loan and three years for a FHA one.  The thing agents almost always forget to say is that you would have to bring 20% down to get a conventional loan in two years.  You can get a FHA loan in three years with 3.5% down but that would be these same for a foreclosure too.  
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January 24 2012
Maybe, a lot of moving parts here.  You should speak with an local Realtor who has short sale experience as a listing agent.  They can walk you through it and what to expect.  No offense, but just being "upside" down is not enough for a short sale, as Wetdogs mentions, there needs to be a hardship.  Also, before you go down that road, talk with a lender to see what or if you will qualify if you have a short sale on record.  Many times that involves not paying your mortgage, which in turn makes it harder to get another one. 
Best of luck
Spirit
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January 24 2012
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Here's a link to a discussion of qualifying hardships for short sales.

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January 24 2012
 
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