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I purchased my townhome 9 years ago. FHA loan for 160K. It's now worth 110K.
Since then I've gotten married, had a daughter, with another child on the way and the 1 car garage, 2 bedroom townhome is not ideal for raising a family of this size.
Bottom line is I want a larger house, and KNOW I could afford it...BUT if I short sell I screw up my credit and won't be able to qualify.
I looked into carrying both mortgages but the burden of 2 mortgage payments (along with student loan payments) pushes the limits of allowable debt to income ratios.
I would love to move up, but like you I don't want to stretch myself with 2 mortgages. It's just too risky getting a renter who may or may not pay the rent. I'd certainly be interested in hearing responses.
I'm sure a mortgage expert can comment on this with better knowledge than I but, just thinking, if you think you can qualify for the new loan now (even if you take your credit it to the hilt), why not purchase the new place, rent the current one for a while (they'll probably require that anyway) and then short sale it after a reasonable period of time? If you short sell before, a new purchase will take a while.
That is what I would likely try and do...but...it's always something. They would still require that I get approved to cover both mortgage payments and...
Because I wouldn't be able to get approved for two FHA loans at the same time, that means I'd have to go conventional...which makes the down payment and debt to income ratio requirements a little harder.
That said, I could probably swing the conventional down payment, but our debt to income ratio and my wife's credit score would come into play. At the moment her score about 660 which would be OK for FHA, but tough for a conventional program. Also the tougher Debt to income ratio requirements would be an issue.
We are in a similar situation... bought in San Antonio in a neighborhood that was new at the time. The builder put anybody with a pulse into these homes. 3 1/2 years later and paying every mortgage payment on time, we are underwater and want to sell. It is so unfair to be upside down ONLY because of the foreclosures and walk-aways around us. We did nothing wrong and actually bought less house than we could afford at the time. Renting it out would take $500 out of pocket, plus, the rental market is SO saturated. People say TX is fine, but I'm here to tell you, it's hitting everywhere.
Manderly6,
If a 5% conventional loan is pushing the limits of what kind of down payment I can come up with, do you really think covering a 50K shortfall is an option?
The numbers don't jive at all... I don't think even Detroit lost a 1/3 of 2001 values. So 9 years into a 30 year mortgage and you haven't paid down any the original note? Did you refinance and take out equity during the bubble?
Never refinanced...and 110K is being generous. I bought for around 164K (correction 7 years ago) and I think I owe 140K. I'm surrounded by bank owned...one bank owned unit similiar to mine just went for 70K!
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