help with buying and selling

[joelrz13]

Hi everyone! i am new here and am hoping i can get some help from anyone with experience... Me and my wife really want to buy a house in this market. We were looking at foreclosures and short sale homes first. Here is our problem though. We own a condo she paid 95k for 2 years ago, which now is giong for about 75k due to the down market (they really got killed here). It is NOT an FHA approved complex due to too many investors. We need the down payment for a new house AND the shortfall for this place too to get rid of it.

If we took out a 200,000 loan, and bought a 150,000 property what happens with the extra 50,000 that we are borrowing? Can we use that for anything we want (like to pay the shortfall)? Any advice on this or our situation we would really appreciate! The forum looks like its full of info and experts. We will have 20-30k in the bank by next spring.

Thank you!
A hopeful new homeowner.

[Moe Bedard]

Hello and thanks for joining LoanSafe!

Unfortunately, you will not be able to get a mortgage and get extra money out of escrow from your lender to do whatever you want. Any money they lend must go for that property for which they are letting you borrow. This is called a secured loan (attached to the property).

Unfortunately, that condo will be a thorn in your home buying side for 3-5 years if you short sale or let it be foreclosed on.

[joelrz13]

thank you for your response.... that is my question though, how do they know where the money is going?? What do you have to provide? Just receipts?

[Moe Bedard]

Yes, they have to know where the money is going.

The lending environment is tough right now. In the past, if you own your property and have equity, you could get a refinance and do whatever you like with the money. But even in the past, it was only on refi's.

Now, you can hardly even get a refinance in this market, let alone the type of loan you need which would be an unsecured line of credit or a $50k credit card where the money will be gone in a day. Too risky for the banks.