topic Re: Short Sale Help! in Mortgage Loans

Short Sale Help!

Anonymous — Fri, 18 Mar 2011 01:27:38 GMT

Hello Everyone!

My husband and I are thinking of moving out of our house that we bought in 2007. We bought at the peak of the market and our house is now worth about $30,000 less than what we paid for it, a situation I'm sure many are in. We are current on all of our mortgage payments and have never missed a payment or ever been late making a payment. Our credit scores are both very good. Our family is growing and we really would like a bigger house, but cannot afford to bring, roughly, $25,000 to closing with us to pay off our mortgage. We talked to our mortgage company and they are willing to do a short sale so that we can move. The problem is the mortgage company will report it as a charge off. Our question is, how much is this going to affect our credit? Will we be able to buy another house? We really don't want to get into a situation where no mortgage companies will touch our new mortgage because of this, even though we are in great standing right now and we wouldn't be doing a short sale to get out of being in foreclosure. Has anyone been in this situation before? Any help would be greatly appreciated since we can't get answers from any of the credit companies that we've called!

Thanks so much!

Re: Short Sale Help!

llecs — Fri, 18 Mar 2011 03:52:47 GMT

Welcome to the forums!

Bumping for others, but I believe a CO on a mortgage tradeline or a short sale mention would knock you out of contention for a new mortgage for at least a couple of years. If I was in that situation, I'd hold tight. I certainly don't know the value of your home or area, and definitely guessing here, but 2 years from now I think you'd be better off financially with respect to real estate by staying put as opposed to enduring a short sale and renting for that period. Aside from the equity build-up, is it possible that home values would rise by $30k between now and then?

Re: Short Sale Help!

ShanetheMortgageMan — Fri, 18 Mar 2011 06:40:02 GMT

Borrowers can use FHA financing to purchase immediately after a short sale if they were current on their mortgage & all other installment debts (a lot of lenders have expanded this to mean all debts, not limited to just mortgage & installment) within the 12 months prior to, and also at the time of the short sale. But it cannot be used to take advantage of declining market conditions and purchase a similar or superior property at a reduced price within a reasonable commuting distance.

Would adding on a room or two to your home be possible with the size of your home's lot? FHA has a rehab program that allows you to refinance and include home improvement costs, including room additions. Adding square footage would be key as you would need to bring up the value more than a regular remodel refinance, in order to compensate for being underwater.

Re: Short Sale Help!

Anonymous — Fri, 18 Mar 2011 17:05:50 GMT

If I git this right in other words, you can not finance after a short scale just to upgrade houses, but say you got a job transfer and had to move and the only way to sell was a short sale, they would allow it. Correct?

Re: Short Sale Help!

ShanetheMortgageMan — Fri, 18 Mar 2011 18:16:51 GMT

@Anonymous wrote:
If I git this right in other words, you can not finance after a short scale just to upgrade houses, but say you got a job transfer and had to move and the only way to sell was a short sale, they would allow it. Correct?

Correct, as long as the payments were all made on time.