Short sale / refinanced / tax questions!

**AU1971** · 03-31-2009, 11:55 AM

Hello

I'm new here! Great site!

Here is my question:

We bought our house in California in 2005 for $525000. It was 100% financing - 3 year fixed (we had a first for 80% and second 20% I believe.)

During year 2, we refinanced since the rate was about to adjust. We have a 1st with ING direct and a 2nd with National City. We took no cash out. About $8000 was rolled into the loan to pay for closing costs.

Would the refinance still be considered purchase money since we didn't take cash out?

We are working with a realtor to try to do a short sale as we are upside down by at least $200,000 probably more.

After reading I am scard that even if we are able to short sale it, they would come after us for the remaining $$.

Also, does the Debt Relief Mortgage Act cover a situation like this?

We are working with an experienced realtor and will consult a lawyer before we go ahead with anything.

Thank you!

**maxx233** · 03-31-2009, 04:25 PM

I would say that if you shortsale it, and they accept, then make sure your realtor has language in the contract that the debt is to be considered satisfied in full. Might be worth having a lawyer proofread as well if you're concerned.