Advice please!! Potential buy and bail?

[zboy63]

I have a home that I can basically sell for 169,000. That would be my best guess. The problem is I owe about 300,000 between my 1st and 2nd. I am current on both loans even though I am only paying the derferred payment on the 1st. It will recast soon, once I get to 115% of the original loan.(I figure about 6 more months). I probably could make the 30 year fixed, but really at this point, why? The house sucks compared to whats out there and I literally would spend every nickel I had to make the full payment. It just doesn't interest me at all. So I had a guy recommend buying another one while my credit is good. Well I found a house bigger and better than mine, and it was a shortsale and it was 195,000 total. Well I could afford that 30 year mortgage no problem, plus the house has equity, and everything would be great. So no way I could get a loan right? Well I applied, turned in my stuff, no funny stuff, and bam! I get approved. And they only want 3% down. So what do I do? I have a family and don't want to get in trouble. I want to buy this house and just give mine back and quit paying on the 1st and 2nd as soon as this new one closes. Is that an option? Is that to good to be true? I could care less about the credit(it will come back sooner or later), especially since I own my cars, and would have another house bought. What am I missing? Please someone with experience help me understand why this is not a good idea? I have submitted nothing fraudlent, I never even said I planned on renting my existing home. I simply filled out a loan app. and sent in my w2', paystubs etc.. I didn't think in a million years I would get approved. Now I want to move into this beautigul house and leave this mess behind, but am scared i could get into trouble. Thanks for taking the time to read this long post

[cactus77727]

Didn't they ask if the home you are about to purchase is a second home? Not primary residence, and they still approved you?

[zboy63]

no, it was a loan for a primary residence. basically the guy said he thought I made enough to show I could afford both homes. That is totally absurd unless they count the deffered payment I make as a full payment, which they must have. But whatever it is approved,and I'm ready to doc it up. Just crazy. I guess I will try to rent mine or sell mine, at least make a good effort anyways.

[Ambling]

I can't believe they didn't ask more about your existing home and what you plan to do with it. Are there still underwriters out there who don't know how to check if a borrower is underwater or not?

Be careful with this... when you go to close they'll present you with about 50 documents to sign that you've never seen before. One of them will likely ask a question that could come back to haunt you with an FBI agent knocking on the door.

[zboy63]

Ya thanks,
That's what i worry about. Still trying to figure out why that would be the case, but I hear ya. I can't imagine how I would be any different than anyone else who has walked away from their house. Still not sure i am gonna do it. The thing that throws me, is it just seems way to easy, especially after all teh srories I have heard and what not. I am looking into just renting it for a while, that would be no different than anyone else I suppose.

[cactus77727]

On the other hand, why would you want to buy another home right now anyway. Prices are still in free fall. Aren't you just going to end up in the same situation in 12 months? Maybe you should just walk and rent.

[zboy63]

good point, that has been my plan, but this house was 69 bucks a foot and brand new. I figured I would never do much better, and could miss out on something waiting for my credit to come back

[Ambling]

If you rent for a few years your credit will come back to normal and the housing market will still be 30% lower than it was in 2007.

I wouldn't recommend anybody buy anything today.

[zboy63]

Another good point. Probably best to rent for a while. I just got all excited when I was able to get a brand new never been lived in, fully loaded with every single upgrade I have ever seen house. Shoot someone owed 420,000 on it at one point, so i though 201,000 was pretty good. But your right probably will go lower. Maybe I will rent and wait it out. Thanks for the advice

[cactus77727]

I just got all excited when I was able to get a brand new never been lived in, fully loaded with every single upgrade I have ever seen house.

This reminds me of what I was thinking back in April of 2006. I was desparate to find a house to buy, thinking I was missing out on something. I thought, in a few more weeks I'd be priced out of the market. Bidding wars, lines of people to view a house. Rushing to get your offer to the seller... Little did I know, I was buying at the worse possible moment in the history of real estate. I think my home's closing date was the exact inflection point that began the nose dive.

I wish I had missed it. I'd be happily renting, instead of waiting for my notice of default and inevitable foreclosure. Hindsight is 20/20... Lesson learned... the hard way, the really hard way.

[UpsideDownEquity]

Hi all. I am contemplating doing the same thing as zboy. Current home has a 1st with HSBC for 126,000 @ 7.9% and a 2nd with Homecomings for $26000 @ 11%. Last refi was in 2006 and I should NEVER have signed those papers. Through a combination of my own poor judgement and circumstances beyond my control, I got myself into a situation where over HALF of my take home pay is currently going towards housing costs. My home appraised for $138,000 in 2006, it is now worth 95,000. Found a nearby home for sale with more square footage yet a smaller lot for 50,000. I also applied for a mortgage on this property and was approved. Plans are to cover the down payment, closing costs, and necessary repairs with a withdrawl from my 401k (that money sure as hell ain't earning anything in there right now!). I'd be more than happy to do a short sale or DIL if the current lenders will go for it as opposed to just bailing altogether. I'm tired of dealing with phone calls from HSBC (The term "grace period" means NOTHING to them! ) as well as mortgage brokers who treat you like you're sub human once they find out you're upside down.

[The Professor]

UpsideDownEquity:

A cautionary note. An earlier post directed us to the chart at:
Image:Cshpi-peak.svg - Wikipedia, the free encyclopedia

I encourage you to look at it. Remembering that your current ownership in real estate created your current financial problem, I'd be questioning whether it makes sense to buy now, despite the convincing argument you are no doubt hearing from commissioned professionals who will only get paid if you buy.

If you look at history, you will find that bottoms are flat for an extended period of time (say 3 to 4 years or more). I question whether taking money out of your retirement account and placing your bets on real estate in this continuing declining market makes sense. This is a time in my life where I'm focused on increasing savings for retirement, not focused on taking on additional financial risk. I recognize that the key to my investment strategy is recognizing the need for principal preservation and not seeking unrealistic returns. Were I in your shoes, I would never place my retirement at risk based upon a perception that "now is the time to buy real estate." Remember those giving you that message are the same experts who said two years ago, "you'd better buy today or you'll be priced out of the market."

Daniel

[UpsideDownEquity]

Considering that my return on investment since 1/1/08 has been -39%(!!!) , I figure I'm better off putting some of that to work elsewhere (ie securing more affordable housing) before there's nothing left at all!

[The Professor]

Perhaps renting will provide you with the opportunity lower your housing costs, and selecting a more conservative investment strategy for your retirement savings (in recognition of the risks associated with high interest rate investment vehicles), will result in a larger nest egg when the time comes.

There is a definition of insanity that I often quote. It is, "doing the same thing over and over again, expecting different results."

Daniel