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Old 12-30-2008, 07:48 PM
 
3 posts, read 15,621 times
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I'm kind of in a predicament...
Being new and naive to the housing market, i got into the market at the absolute WORST time, bought a townhouse 3 years ago and now its worth about 135,000 from 177,000 (I paid for it) at 100% financing 80/20 with 5 year arm on the primary loan. So I made a bad move with the house, and have since got married with a baby on the way. Wife is out of work (laid off) and wont be going back to work until baby is born.

In order to save some money, I'm renting out my townhouse, losing about 300 per month, but making that up by having a rent about 500 cheaper than my mortgage, thus saving about 200-300 per month. Initially i was thinking about renting this house for a short time (1-2 years), then buying another house since the market is soft and a good time to buy, to offset the depreciation of my other property.

I'm trying to figure out what to do with my townhouse and I dont want to foreclose/short sale as it will kill my chances to buy another house. However, I want to try to get my lender to modify my loan due to my hardship of finances. Provided I qualify for a hardship, should i tell the lender that I am renting the property? Should I have already told them that I no longer live in the property? What is the best thing to go for? a lower fixed interest rate? principal reduction? any ideas?
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Old 12-30-2008, 07:53 PM
 
Location: Montrose, CA
3,031 posts, read 8,045,430 times
Reputation: 1927
Wait, let me get this straight...you're upside down on your house, so much so that you can't live in it, you have a pregnant wife who can't work, a new (expensive) baby on the way, and you want to put yourself even deeper in debt by buying another house?

Yeah, that's a GREAT idea.
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Old 12-30-2008, 07:59 PM
 
3 posts, read 15,621 times
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No, I moved out because I now have a house with more space for the baby and a spare room. I can fork the mortgage there, i just opted to move out because im saving money each month and I have a hell of a lot more space for my wife and baby. I bought the townhouse when I was single and it was just me... didnt need much space.
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Old 12-30-2008, 09:24 PM
 
Location: MID ATLANTIC
7,731 posts, read 18,615,543 times
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All of the rescue programs are for owner occupied homes only. Even if they did a mod, you would be lucky to see a dramatic difference. However, every program out there has said, they will only support the rescue of primary residences, something you no longer have.

You're in a catch 22, but unless you started renting out the home within the first 6 months after you bought it, you are fine, it's the intent to be a primary residence. Most docs printed today say you agree to occupy the home as your primary home for a period of one year. But life happens and situations change. If you lose the home, they will certainly find out you are no longer living there. But your reasons to rent it out are sound, you are trying to remain financially solvent. I think that must be your primary goal right now, trying to remain solvent. Unless there is something here that is missing, you should be fine. Go ahead and send up a flag and see what kind of response you get - but I am not optimistic. To try to pretend you still live there, that is fraud. Once the fraud stamp hits your file, there will be no working out anything, so please don't try it.

As for looking down the road for the next purchase, that's really getting ahead right now. The qualifications to purchase have gotten so tight, and if there is a rental involved, it's not as easy as it was.

(If the loan is a first time home-buyer program with restrictions on renting, you have a problem.....usually these are loans funded by the state you live in. If this is the case, see legal help now).

Good luck and hang in there.
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Old 12-30-2008, 09:43 PM
 
Location: Cary, NC
1,036 posts, read 3,686,563 times
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As SmartMoney said, all these programs talked about are for primary residences. Very few will write down principal either. Most prefer to offer interest rate reductions if they can make the payments managable for the owner. They want to keep the principal so they can recover the money in the future if at all possible.

You should be fine that you are renting it and have not told. Its intent that matters and you did buy to live in it and did so for a while. Situations change and you rented it out, no problem and no need to alert everyone.

However, do NOT apply for a program and lie that you are still living in the home. If you apply for a hardship, be honest about your situation. It might make it harder to get it done.... but do you really want them to come after you for fraud if they find out? That will definitely kill your chance for another home and possibly more.
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Old 12-31-2008, 02:01 AM
 
406 posts, read 1,208,777 times
Reputation: 143
i hardly ever pay a mortgage, i always let the tenants do it for me. if it doesn't pencil, i don't even consider it no matter how pretty it looks. you are not doing anything wrong, as long as you followed your loan's wording.

with that said, i have never had a problem with the banks knowing them to be rentals, even after i qualify for them with conventional loans for a primary residence, or with an FHA for a multifamily. so i would not be worried about it. you did your time in that place, just as you were told you needed to. when i was buying rental properties the rule was 1 year, now the FHA says 6 months is ok.

i also hear that the FHA will be making it easier to get loans in Feb.? anyone else heard of this? but i would not buy anything just yet, even if you could.

i don't think you have much choice but to do one of two things before your ARM adjusts. 1. either move back into your townhome and then apply for loan modification, or 2. tell your banker, and see if they can help you refinance after you move back in. you are well qualified to receive help from my limited understanding of what the gov't is trying to do. just save that 2-300 bucks for a few months, buy cloth diapers for your baby, tighten your belt, and move back in to refi, just so you can pay a loan which is worth more than your home. or you can short sale.
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Old 12-31-2008, 05:02 AM
 
3 posts, read 15,621 times
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Thanks for the advice...
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Old 12-31-2008, 06:24 AM
 
Location: Montrose, CA
3,031 posts, read 8,045,430 times
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Quote:
Originally Posted by colsen6 View Post
No, I moved out because I now have a house with more space for the baby and a spare room. I can fork the mortgage there, i just opted to move out because im saving money each month and I have a hell of a lot more space for my wife and baby. I bought the townhouse when I was single and it was just me... didnt need much space.
You specifically state you're in financial hardship and that you want to find a way around it so that you don't have to foreclose on your house. And you want to buy ANOTHER one? I stand on my original statement. Bad BAD idea. Pay what you owe and don't go deeper into debt.
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Old 12-31-2008, 11:15 AM
 
406 posts, read 1,208,777 times
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Quote:
Originally Posted by SuSuSushi View Post
You specifically state you're in financial hardship and that you want to find a way around it so that you don't have to foreclose on your house. And you want to buy ANOTHER one? I stand on my original statement. Bad BAD idea. Pay what you owe and don't go deeper into debt.
always best practice, but sometimes not possible.
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Old 12-31-2008, 07:47 PM
 
2,838 posts, read 9,037,783 times
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Quote:
Originally Posted by michael11747 View Post
always best practice, but sometimes not possible.
Exactly. If you can hang on to the condo for a few years, prices are bound to go back up at some point. If you are renting it out and making almost what the mortgage is, and are able to save that much by buying another condo/house at a low (with a low mortgage payment), then that is probably the best thing to do. Why throw away your money on rent if you can spend the same money each month and own your home?

You will not be in this situation forever. Your wife may choose to go back to work after the baby is a few months old (or maybe she won't), you may get a raise, you might be able to raise the price of the rent on your condo in a year, who knows?

It's good to have a long-range plan... if you end up losing the condo to foreclosure in the meantime, though, then at least you will have another home to live in!
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