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Discussion Starter · #1 ·
My wife and I bought our house in July of 2008 for 150k using the FHA first tome home buyer program, the house previously sold for 285k on 1/2007 so we thought we got a great deal. Everyone told us not to buy out in this town because it was so far away from everything (35miles south of phoenix and our job's), we figured we were getting a huge new house (built in 2006) for cheap and could sacrifice the distance. But now the drive to and from work is getting really annoying and we are waning to get out and purchase something closer to work (the hour long commute each way is just too much to handle)

we did refinance in 2009 using the FHA streamline to decrease our interest rate from 6% to 5%

looking at our last statement we still owe about 141k, and zillow.com shows our house worth 128.5k

What are our options? Our debt to income is maxed out so we cannot purchase a second house with a standard mortgage and hope we can rent out the one we are living in now. We don't want to foreclose because we want to purchase something closer to work, so that means short sale i think is out of the question. Can we call the bank and see if we can work out a payment plan for the remaining balance if we sell the house for less than what we owe? or does it not work that way?

We already tried contacting our loan underwriter and he said that FHA wont allow us to repurchase a second home and rent out the initial one (using it as rental income) because our hour long commute to work is not long enough to be a valid reason to want to move.
 

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I would not recommend using internet sites (such as the one you used) to determine how much your property is worth. The more accurate way is to find a realtor in your area, s/he will provide you the CURRENT market value of comparable properties. That info would be closer to what your property MIGHT sell for.

You said you still own about $141K, if some comparable properties are selling less than that, & if you are selling then that would be a shortsale. Try to find a realtor who specializes in dealing with shortsale lenders.

Bank will start reviewing your case, when there is ratified contract (a firm offer from a buyer) & if you’re in financial hardships (loss of job, paycut & such) before they approve the sale. Even if your realtor finds a buyer fairly quickly, waiting for the shortsale approval is a very long process, could take 6-12 months.

Foreclosure is when you default on your payments, I don’t think that applies to you, assuming your account is current.

Before you decide to sell, you need to consult with your accountant on the tax consequences of a shortsale and/or foreclosure sale (the forgiven amount could be taxable income).

There might be a waiting time before you can purchase (apply for a mortgage) after a shortsale and/or foreclosure.
 

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why don't you sell the current house, and THEN buy another? am i missing something?

a foreclosure on your record seems huge compared to whining about your commute?
 

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Discussion Starter · #4 ·
well going off of zillow we would be negative about 13-15k.. Even if I had a realtor do comps on our house I garantee that we currently owe more then the house would sell...

would we need to come up with this money and pay it all at once? or would Bank of America work out a payment plan with us to repay that remaining balance?

say we can sell the house for 130k, but we still owe 140k.. would they even let us sell it?
 

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well going off of zillow we would be negative about 13-15k.. Even if I had a realtor do comps on our house I garantee that we currently owe more then the house would sell...

would we need to come up with this money and pay it all at once? or would Bank of America work out a payment plan with us to repay that remaining balance?

say we can sell the house for 130k, but we still owe 140k.. would they even let us sell it?
Generally, the bank will require all outstanding balance to be paid in full when the property is sold. That's mean if the property sold for $130K, minus closing costs (realtor's commission, escrow fees, prorated property tax...etc), your net could be about $121K, you will need to come up with cash of $19K to payoff BoA.
I doubt BoA will agree on a payment plan for that amount. It probably requires you to deposit that amount in escrow before closing to ensure they receive the full payoff amount.
 

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Discussion Starter · #6 ·
Generally, the bank will require all outstanding balance to be paid in full when the property is sold. That's mean if the property sold for $130K, minus closing costs (realtor's commission, escrow fees, prorated property tax...etc), your net could be about $121K, you will need to come up with cash of $19K to payoff BoA.
I doubt BoA will agree on a payment plan for that amount. It probably requires you to deposit that amount in escrow before closing to ensure they receive the full payoff amount.

wow that really sucks.. so basically we are stuck, unless we hit the lotto or something
 

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Or until property values come back up, or until you pay your debt down and stop selling the future to buy the present...
 

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This is my scenario...

I travel 1+ hours one way to work per day... work monday thru friday...I have thought about selling our home but considering what we owe and the market prices now...its not gonna happen...I have another peice of property down the road from the one i live in and its been on the market for over a year..just recently reduced the asking price by $10,000 and still no interest...The real estate lady says its worth the price we are asking its just that houses are not selling right now....(so it my opinion its not worth what we are asking)...however she says if you sold it for what you could get out of it right now....it would be a stupid mistake....so there it sits....and hoping spring brings the housing market up....so the point of my story here is...I have looked at renting my house and moving closer to work but when i compare my current house payment with what i would have to pay for rent, etc....it looks like i will continue to drive the 1+ hours each way to work for a while......and look for work closer to home...
 

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In this situation I would just stay put and wait for property values to rise. I would not risk my credit, by doing a foreclosure or short sale, just because I was getting tired of the commute.
On top of what you owe on the house you must factor in real estate and legal fees involved in the cost of selling, which would add thousands more that you would be out.
 

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Can't offer any advice on the mortgage, but........

Have you thought about checking into renting a small place closer to work? Not a huge house, but maybe just an inexpensvie apartment. Keep in mind the gas and milage on the car you would be saving.

If its cheap enough, you could stay there during the week and have the house for the weekends. Otherwise, you could then rent out the house for at least enough to pay your rent at the new place.

You might actually be able to use the rent to pay the mortgage and get yourself into a holding pattern until the markets rise again and you can sell.

you could probably use a property management company to handle the lease and renter interaction too.
 

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Gas and mileage savings on a 35 mile commute? In Phoenix? If the gas and mileage costs amount to $500/month, MAYBE - but I doubt it.

I did the hour+ commute thing for 9 years from Bel Air MD to southern and western Baltimore - 1993-2002. It sucks. Suck it up and wait it out till the housing market comes back some. Get a fuel efficient car.
 

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yup....I drive roughly 100 miles per day...

and use roughly $50 a week in gas...the wear and tear on my vehicle is another story...however it is a 2000 dodge stratus and its not worth anything... as i say... I am gonna run it until it runs no more...or something major goes in it, like the motor and then not worth replacing...
 

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I'm going to strongly suggest that you read Dave Ramsey's "The Total Money Makeover" - it'll give you some good plans for getting your currently out of control finances under control.
 

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Commute distance is going to be a huge deal with gas prices going to $5 a gallon by 2012. Can you carpool? Can you get a cheap place to stay 1 night a week to cut your commute to 4 days a week? Or would it be possible to work 4 longer days and have 3 days off?
 

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I totally agree with Greebo.

Count this as a "life lesson" and next time take into consideration all "advice" given by others, don't just discount them without weighing the pros and cons. Sometimes it's better to learn from others "mistakes" than have to go through it ourselves.

Listen to Dave's cd, make a plan and follow it through!! Stay focused, stay in your house and when you're on the upside of your mortgage, then consider selling. Good luck!

**I just wanted to add that we had JUST signed into a van "fleece" (paying $510/month) one month before we first heard of Dave Ramsey. There was no way we could get out of the "fleece", no one would take it over for us and it was for 3 years!!! WOW.... that was a tough life lesson because during that time we not only had to pay for our "fleece", BUT we also had to save money for when the "fleece" was up, so that I could buy a vehicle when we turned our van back in. I'm proud to say that we did it! It wasn't easy and it sucked for that full 3 years knowing all that money we were paying out on the "fleece" and we wouldn't see a dime of it after. I just wanted to tell this story so you'd know that I do understand about making unwise decisions and having to deal with the consequences.
 

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Commute distance is going to be a huge deal with gas prices going to $5 a gallon by 2012.
Can I have the address of the store that sold you your crystal ball?
 

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Right now you're house value is down about 20k. That's 20k you've "lost" on paper right now - plus whatever interest you've paid in the last 2 years which I'll guess is another 10k or so. (Oh that's real estate interest - which is LESS bad than the thousands of other interest you've lost from the other debts... but still bad)

Now you're gonna keep losing money on interest while you live there - but if you sell it short, or let it get foreclosed - your loss will be realized - it'll be a PERMANENT loss - and it'll take a LONG LONG time saving money on the commute to make up for that lost 20k. Not to mention the damage it'll do to your credit which will hurt you in myriad other ways - like your CC's will jack your rates up to 30%...
 
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