Possible Foreclosure....I don't know what we should do.

[Anonymous]

History..my husband and I built a house which was completed in May 2008.  The home loan was 181k and the appraised value was 256k. Since lending changed from construction loan to the time of perm. financing the allowed us to do an 'in house' loan w/the lender for a term of 2 years.  Our credit score decreased by about 40 pts from the beginning of construction to when the house was complete.  My husband was/is self employed and the choices of lenders at that time were already changing. This credit change made our note 1900.00 (includes tax, insurance).

Our house is 4 mths late, my husband is not very busy and I do work but it pays mostly medical insurance/small bills such as utilities.  We are supposed to re-finance in Oct. 2010 and our credit is in shambles.  If I had to guess I would say our scores are around 400 if not a little less.  We had credit cards that we just could not afford to pay, they have been sent to collections.  And to top it all off we built our house on family property.  Meaning, our house is in the middle of my dad's property with another house on it and plans for another house right by mine for my parents to live in.

This house was something we dreamed about for a long time.  We finally had the income and credit to build and as soon as we did the economy does it's thing!  I live with a tremendous amount of stress and I'm just waiting on a foreclosure notice to be delivered! 

Is Bankruptcy something we should do?  I would hate to do something like that which would haunt us for 10 years!  We did that already 10 years ago I don't want to go back!

[Jazzzy]

You say that your husband is self-employed and is not very busy. Any chance of a better paying job for him? That could turn things around rather quickly. If possible, could he work and keep up his self-employed business?

[Anonymous]

1st thing is to see if you can actually afford the payemtn once you get caught up

Second, If not, what can you afford.

You have 2 separate issues.  1st is avoiding foreclosure.  Second is the refi (I assume it is a balloon type payment that is due hence the reason for the need to refi.

4 months late on your mortgage now means there is no way you are going to get a refi loan at the bank by Oct 2010.  No bank is going to do it.  Really what you need to do is contact the bank you are at now and see if they could modify your current loan to a fixed rate loan at a reasonable %.  The problem is that the first they they will want to see id your income and expenses.  One of the key reasons people are getting denied modifications is job loss or loss of income.  A bank is not going to go through the process of helping fix the mortgage issue if they have no real expectation of you being able to recover in short order.  You and your husband need to sit down and realistically decide what you can and can not do.  Maybe one option would be to have one of your relatives "buy" the home now and you rent it from them until you can purchase it back.  Since you could avoid realtors fees it could work out.  Just understand that it may be 4-5 years before that can happen with your current job.credit situation.

Good luck.

[Anonymous]

Lynette, he has looked for full time jobs and applied for them.  The problem is that there is no hiring.  He does plumbing and has construction experience as well and has tried to get a job as a superintendant (he did this before) and no luck.

The sad thing is that there are several county utility projects going on and with it being out of town contractors doing the work, they aren't hiring local people, they brought their own people.  There's also a large apartment complex going up and they had to put a sign which had words spray painted on it that read "Sorry, no hiring".  That just shows they must have had a lot of people stopping in to see if they were hiring.

[Anonymous]

The option of a family member "buying" the house is probably my most realistic at this point.  My dad would be that person but I don't want him to get into this and it affect his being able to buy a house in the next few years.  (My parents live in a house they used to rent out....long Katrina story).  So, I know they are planning to build but are waiting for economic times to change.  I know it would be a short 4 to 5 year period and maybe since I work full time I could get on the loan with him but I'm not sure how all that works out.  My credit stinks and his is excellent.  This would also help us to bring our payment down to a payment I know we can easily afford at this time.

That all sounds great but how to you go to a family member and tell them that you have failed.  That you signed up to pay a note that shortly after doing so, you knew it was bad.  My husband went from making around 10k a mth or so to 2k to 3k.  That all changes each day but there is no guarantee at this point and no new houses under construction like there were before.  It's not so much the thought of losing the house b/c I've got my health and my kids are all healthy and great.  It's the point of people knowing that you let yourself get into such a situation that I feel I cannot control.

[Anonymous]

That I can not answer for you, but the longer you wait, the less likely someone wil be able to help.  The other complication is did you guys have the lots on the property legally separated, or is it all one lot.  Last, is the house worth what is owed on it.  If you finished bulding in early to mid 08, most areas have lost 10-20% of their value since then.  That means that to get a loan on it, unless the home has equity, someone may have to bring cash to the table.

[Anonymous]

We did have the property legally separated.  My dad had a total of 22 acres and we got about 1 acre put in my husband and I's name.  We borrowed 181k from the bank and at the time the house was built the Present Market Value at completion was 237,500.00.  So, I think even with a decline in market value we would still be positive as far as equity goes.

The other thing that hit us hard that we did not expect was insurance.  Because of Hurricane Katrina in 2005 and the fact that we didn't have homeowner's insurance before the storm, we pay nearly 5k a year for insurance, nearly 500.00 a mth of our housenote is insurance. 

I am going to talk to my dad about refinancing this with me.  I don't know if that will make him feel better about it since his name won't be the only one on it.  I just don't know if my credit is going to hurt it and make the note higher or if it would be better to just have him and my mom.  Then I worry that this would open a whole other can of worms as far as this not being their primary residence.  It would be investment property, this may affect insurance, taxes??  Not sure but I am going to see what happens.

Thanks for responding.  I don't have anyone else to talk to about this except my husband and he's as stressed as I am.

[Anonymous]

you and your husband will probably be able to be on the deed, but not on the loan.

The real question is being honest with yourselves though.  The last thing you want to do is get someone else tied up in your financial problems unless they are behind you (and they do not appear to be).  Look at what your income is now and then be honest with yourselves.  Can you afford this house, the 500 per month insurance, medical bills, food, etc.  If not then it may be time to let go of it.  That would be better than draggin someone else down with you.  If it was not for the necessary refi, you may be able to get some help just to carry you through, but now that it has to be refi'd, and 4 payments late is considered by banks to be foreclosure status, it will be 3-5 years at least before you will be able to get a normal mortgage.  On top of that, self employed mortgages are very strict and you and your husband may need to eat alot of costs that I am guessing he would normally attempt to write off since they will not count thsi as income otherwise.  I now most construction workers I know write off so much expenses that they do not "make" alot of income.  Since stated loans are gone and not likely to be back anytime soon for anyone with credit issues, you guys just need to sit down, and figure out exactly what you can or can not do.