Walking Away in CA - Anything (Else) I Need To Worry About?

[gus_92126]

I have tried to get my loan modified but with the low 5.8% rate I already have plus the fact that the loan is a Jumbo Arm not resetting until 2012, and my income - while it has plummeted in the last year - is still too high to claim hardship. I also own two other underwater properties that luckily, aren't too bad and well financed.

The problem is with my primary - a 3BR condo I purchased right after my divorce in 2005. I have lost $200,000 on it and I am paying two interest only loans in the amount of $3000 a month - not including property taxes or HOA. I have recently married and have a baby on the way next year. This condo is way to small for us now and there are homes twice the size for $500,000 in my neighborhood - with less mello roos and lower HOA fees.

So, basically, if we buy a house now, we can start paying it off and live there for 10 years or so. If we stay here, we will kick ourselves because the opportunity will pass to buy (while I still qualify) and this place won't go up in value until maybe we have thrown another $150,000 away is interest only payments.

We have decided to do it. We are going to buy a home in the next couple of months with FHA financing. We will ask the seller to pick up the closing costs and we will pay the 3% down. Once we are in the new home.... that's my question.

1) Short Sale - we would prefer to short sale the home but I am afraid that we would need to default on the payments first and prove hardship which will be difficult. Plus, there is a home - same model as ours - right down the street that has sat there for some time. I think our unit is a little more desirable and better maintained but do we list it and keep paying? Or list it and stop paying? What about HOA fees? Taxes are all paid up until next April.

2) Deed in Lieu of Foreclosure - maybe this is the best option? Buy the new home, move and then offer the place back? What if they don't accept? We have no tax liens against the property and it will be vacant and clean when we leave. Do we keep making payments while we wait for the bank to decide?

3) Foreclosure - My least favorite option because of my credit. Spouse's credit is in the toilet due to a foreclosure on a relative's home. We do not buy on credit and we will be happily in our new home for several years BUT a good credit report seems to be a necessity when operating a business.

Any help would be appreciated greatly. Thank you!

[homerunkevin]

I actually wanted to do the same thing. I currently have condo being rented out. I want to buy a home and afterward somehow either short sale it or foreclosure on mines.