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Just looking for advice- not judgements!

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Familywantsahouse
Frequent Contributor

Just looking for advice- not judgements!

We have friends who need to relocate at the end of this school year. They are currently WAY underwater in their current mortgage (probably realistically close to 100k) They feel their best option at this point would be to stop paying their mortgage and save the 2k a month. A short sale might be an option, BUT it would be tough with the timing and there is no guarantee thy can save as much money as just not paying.

 

Only the husband's name is on the mortgage. The wife's name is NOT and she is the one who will be the primary breadwinner in their new location. She would like to try to buy a house in their new location, as it's FAR less expensive than renting.

 

Her credit is good. Can she qualify for a loan on her own? How does "rental verification" work in this circumstance? I suppose the answer I've been living in my our house that foreclosed mortgage free for a year isn't an ideal answer.

 

They wish their option were different, but they bought in 05 in one of the most inflated markets in the country. Her husband was laid off for TWO years in 09/10 and they never missed a payment. Now they need to move and are stuck between a rock and a hard place. They can't rent it out because the rent won't cover the mortgage and they won't be able to cover the shortfall.

 

Are they as picky with conventional loans about rental verification? Especially if they've got 20% down?

2/24 (Lender Pull) EQ 613, TU 553, EX 589
April EQ 633, My Fico TU 638, EX ??
Current EQ 643, TU 652, EX 633 (lender pull 5/11)
Goal (we made it!!)- Over 640 middle by 5/15
Message 1 of 14
13 REPLIES 13
rckstrscott
Valued Contributor

Re: Just looking for advice- not judgements!


@Familywantsahouse wrote:

We have friends who need to relocate at the end of this school year. They are currently WAY underwater in their current mortgage (probably realistically close to 100k) They feel their best option at this point would be to stop paying their mortgage and save the 2k a month. A short sale might be an option, BUT it would be tough with the timing and there is no guarantee thy can save as much money as just not paying.

 

Only the husband's name is on the mortgage. The wife's name is NOT and she is the one who will be the primary breadwinner in their new location. She would like to try to buy a house in their new location, as it's FAR less expensive than renting.

 

Her credit is good. Can she qualify for a loan on her own? How does "rental verification" work in this circumstance? I suppose the answer I've been living in my our house that foreclosed mortgage free for a year isn't an ideal answer.

 

They wish their option were different, but they bought in 05 in one of the most inflated markets in the country. Her husband was laid off for TWO years in 09/10 and they never missed a payment. Now they need to move and are stuck between a rock and a hard place. They can't rent it out because the rent won't cover the mortgage and they won't be able to cover the shortfall.

 

Are they as picky with conventional loans about rental verification? Especially if they've got 20% down?


If her scores are there, I don't even see a reason for rental verification. I was over 700 when I apped for FHA and they never even asked about my current housing situation.

 

I think it really depends on if the state they move to is community property, because wouldn't the husband have to disclose the debt if he is required to be included? And if the current state is community property, whould SHE have to disclose the debt on her application, because technically its her debt too?

 

-scott

Starting FICO Score: October 2010: TU 498 | EQ: 502
Current FICO Scores:: May 2022: TU: 784 | EQ: 770 | EX: 790
Message 2 of 14
drkaje
Senior Contributor

Re: Just looking for advice- not judgements!

If they're in a community property state, things may be tricky. There are a ton of threads about non-applying spouses credit being pulled. If she had a big down payment and perfect credit things might go pretty smoothly.

 

There's still a chance they will run his credit, though. I think she should do a bunch of research before letting things go. Forcing a short sale and not getting a mortgage could be worse than being "underwater".


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Message 3 of 14
StartingOver10
Moderator Emerita

Re: Just looking for advice- not judgements!

Relocation is a valid reason for a short sale. It's done all the time and is a fairly simple short sale process, depending upon the lender(s) involved.

As pointed out in the previous posts, the issue would be if your friend is relocating to a community property state. To which state are they relocating?

Message 4 of 14
webhopper
Moderator Emeritus

Re: Just looking for advice- not judgements!

I don't recommend to just stop paying. Especially if you're way underwater... they could come after him and possibly you for the deficiency balance. What makes the most sense is to do a harp refi if possible and then short sale. The refi will help keep the house afloat while you're going through the short sale. If the loan is backed by fannie or Freddie that's where I would start.
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Message 5 of 14
jules0580
Regular Contributor

Re: Just looking for advice- not judgements!

From what Ive read in a few places and didnt know until recently, if the bank agrees to a short sale then the occupants are allowed to stop paying the mortgage so they should try applying for the shortsale, then they could do both.

Message 6 of 14
Familywantsahouse
Frequent Contributor

Re: Just looking for advice- not judgements!

It's not me. We're closing on out new house Friday Smiley Happy

 

Neither state is community property. I will suggest the short sale. I guess I didn't think about the fact they could wait to list it til next spring.

2/24 (Lender Pull) EQ 613, TU 553, EX 589
April EQ 633, My Fico TU 638, EX ??
Current EQ 643, TU 652, EX 633 (lender pull 5/11)
Goal (we made it!!)- Over 640 middle by 5/15
Message 7 of 14
tooleman694
Valued Contributor

Re: Just looking for advice- not judgements!

Since its not a community property state she should be fine.

 

If it was a community property state, her only option would be to do a conventional loan.

 

Crazy someone could get 100k upside down, are they moving from Califoria or something. Iv heard some stories, im originally from Cali and my friends took some hits.

Message 8 of 14
rckstrscott
Valued Contributor

Re: Just looking for advice- not judgements!


@tooleman694 wrote:

Since its not a community property state she should be fine.

 

If it was a community property state, her only option would be to do a conventional loan.

 

Crazy someone could get 100k upside down, are they moving from Califoria or something. Iv heard some stories, im originally from Cali and my friends took some hits.


My entire neighborhood is upside down by nearly that much I am sure; I am in Chicago area..

 

I bought my house for 100k less than the seller bought it for in 2005 -- not a short sale or anything. I am not sure how much of a LOSS they took, but almost everyone in our area is at the minimum 60-80k in the hole on their house

 

-scott

Starting FICO Score: October 2010: TU 498 | EQ: 502
Current FICO Scores:: May 2022: TU: 784 | EQ: 770 | EX: 790
Message 9 of 14
tooleman694
Valued Contributor

Re: Just looking for advice- not judgements!

Im sorry to hear that.........

 

We have been lucky in the Dallas area. Home are not dropping in value, they have been increasing but at a slow slow rate.

Message 10 of 14
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