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Greetings all, My family and I would like to move to a better location, however, the value of our home is 50k less than what we paid in 2006. I owe 195k on the mortgage. Judging by recently sold homes in my neighborhood, I expect around 150k market value.I was thinking of the following options: refinance the 6.5% interest and rent out the property pay off the balance with a 401k loan, pay back the 401k loan as fast as possible. we can live in an apartment or stay with family short sale the house. (with the hit on credit, how will it affect my next mortgage loan?)Any advice? by lindae_819_154 from Matthews, North Carolina. Mar 16th 2012 Reply


William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions

There's a lot of information missing, but in general, if you short sell your home, that is a hit on the credit report, and most lenders want a 3 year waiting period prior to applying for a new loan. There is an FHA product that allows you to short sell your home, and purchase a new home providing you're not taking advantage of the current market conditions (like buying the house across the street for $100K less) and you must have been current on ALL your obligations, including the mortgage, in the past 12 months.. There has to be an acceptable reason for the short sale... I have a client now that got laid off in CA and could only find work here in AZ... She short sold her home in CA, was never late on the payments, and is now under contract for a new home in AZ. This is an acceptable circumstance, and allowable under the current FHA guidelines... if you contact a local mortgage broker in the area your thinking about moving to, and talk to them about your plans... he might be able to guide you strategically to ensure you can purchase your new home upon relocating.. WilliamAcres.com

Mar 16th 2012
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 2,431 contributions

Actually there are a couple of things you can do. First off, doing a short sale should probably be your last option. Best case, if you are never late on the payments and do a short sale, you are penalized with at least a two year penalty, to as long as seven years, unless your reason for moving is a job transfer, similar to what William referencedYour best option is to check out and see if your current home loan is eligible for HARP 2.0. If your mortgage is owned by Fannie or Freddie and the current mortgage originated prior to June 1, 2009 then HARP 2.0 will allow you to refinance to much better terms, even if you are upside down, like you indicate. You will need to keep this property as your primary residence for at least one year after the refi, but then would be free to purchase another property and make this a rental. For most people, pulling cash out of a retirement plan is not wise. HARP 2.0 is going to have a feature for refinancing investment properties but it is expected that the pricing will be much higher than for owner occupied. You can check out if your home qualifies here: For Fannie Mae (FNMA) use http://www.fanniemae.com/loanlookup/ For Freddie Mac (FHLMC) use https://ww3.freddiemac.com/corporate/. ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

Mar 16th 2012
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Jedd Nabonsal (jeddnabonsal)
#523 ranked lender in California - 27 contributions

Check and see if you have a Fannie Mae or Freddie Mac 1st mortgage.The HARP 2.0 rolls out next week allowing eligible borrowers to borrow at today's low rates in a negative equity position.Call me and I can walk you through how to check.It is easy to, check onlineGoogle fannie mae lookup, and then if not, freddie mac lookup and go through the lookup process.My advice is to refinance under the new HARP 2.0 (Home Affordable) if you qualify, and then stay in the home for at least 1 year to satisfy you new agreement to occupy the house for at least 1 year. After that, you have time to look for next year's property and prepare this one to be a rental.Depending on your income level, you may be able to qualify for the purchase of a new home next year, and hold onto this property with a low rate of possibly 3.875 to 4% fixed for 30 years with no PMI!This excellent financing will allow you to hold on to this property, maintain your credit, and turn it into a great rental one day due to long term low interest rate financing. These low rates will not keep being this low forever. Now is the time to grab low rates if you can qualify.I know the new HARP guidelines and approach is going to be quite liberal, and I believe should be a spark to the Mortgage lending business.Never befor have lenders allowed borrowers to borrow mortgage money with the "loan to value" ratio exceed 100% in the senario that a client owes $350,000 and the house is worth $235,000 in this case the loan to value ratio is 149% because $350K (loan) divided by $235K (value) = loan to value.In your case $195k loan divided by the $150k value equals 130% loan to value. The new HARP 2.0 will allow that loan to value.The new Harp 2.0 rules coming out monday will allow for much higher loan to valuues above 100% all the way up to 150% or higher.Your expenses divided by your income, are known as the debt ratios. Super high debt ratios are when you are above 50%.The debt ratio guidelines for HARP 2.0 are also suppose to allow super high debt ratios.Of course you must be a fannie mae or freddie mac refinance of an existing fannie or freddy loan.If not you'll have to call me for advice about that.Please call me either way!Jedd Nabonsal Mortgage Broker Pinnacle Bancorp Cell:310 433-1703 jeddnabonsal@gmail.comMore will be clarified next week

Mar 17th 2012
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Brett Pehrson (brettpehrson)
#19 ranked lender in Utah - 228 contributions

I would agree with the other comments here that a short sale should be your last resort, and keep in mind it will likely effect your credit but you may be able to take advantage of an FHA loan if you qualify for a new loan based on their exception rules that were well articulated by William Acres above. It sounds like you may be able to qualify still for one of these HARP 2.0 refinances, but only on the owner occupied guidelines; they are now allowing investment properties, too, if you choose to rent it out in less than a year, but I would be surprised if you could get it approved that way, based on the information you've given here.Regarding your other though of drawing against your 401k, well, I'm glad you said loan instead of withdrawal, as you will likely avoid tax penalties by taking out a loan. I would suggest you consult with your tax adviser and/or financial planner prior to proceeding with any strategy involving your 401k; however, as a tax professional myself, I would say this is a viable option for you, but with a little twist. If you can qualify for your "move up" home along with your current home's debt, you could take out your 401k loan to help purchase the new property...this would probably be a better strategy for you to qualify, and take advantage of the best interest rates and the part of the tax code related to home acquisition debt. You then rent out your current residence using the tax code in your favor as well; if the market rebounds in the next 3 years, then you can sell the property for a tax-free profit (minus any depreciation you take while it's rented) or you can sell the property at a loss (assuming you are liquid enough at the time it's sold) and actually claim the loss on your taxes. That may be a bit of an oversimplification, but that is the gist of it. If this is appealing to you as an option, just be aware you need to make sure you plan it out accordingly with your mortgage professional, tax adviser and financial planner; very rarely will the same professional be able to tell you everything you need to know about this kind of strategy. My advice, however, would be to seek out a local mortgage broker, as they will have more options available to you for qualifying, as well as be more likely to be educated about these other financial matters, or at least have the proper contacts to get you the answers you need.

Mar 17th 2012
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