Forclosre or Short Sales?

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I have owned a condo for 2 years. I have made no late payment on my mortgage loan. But my loan will turn into variable interest in about 2 months. I believe it will be in the
9 + interest rate against what i pay for at 7.25 percent right now. My property was 305 k when I bought it, but it is worth about 275 K now. With the depreciation in value and the hike in interest rate, I think i can no longer afford to pay for my mortgage. I have consulted to a couple loan officers about refiancing my loan. But I wouldn’t be able to do so unless i bring in about 30 K +. I AM THIKING ABOUT FORCLOSURE OR SHORT SALES. Please tell me which is the good way for me to solve this mess. Any advice if appreciate it.

I have an interest only mortgage that is set to adjust this October on 80% of the mortgage amount (currently at 6.75%). The other 20% is a regular piggyback loan at 10.25% for 30 yrs.
Basically the house was purchased with 100% financing.
Total loan amount was $ 282k. Now around $ 280k.
In my opinion the house is worth around $ 230-240k. My total payments are (interest and principal) $ 1,700.
I have about $ 20-25k in savings.
What is the best thing to do in my situation?
Refiancing is a very expensive thing to do for me right now. With at least 10% (some banks want 20%) down I can only get around $ 200-210k loan and I owe $ 70k more with only $ 20-25k savings.

Thanks for your inputs.

4 Comments
  1. Reply
    Bestbank Real Estate
    April 29, 2011 at 9:46 pm

    Looks like someone did you un justice when they sold you the property. A short sale is almost like a foreclosure. You are not holding up to your side of the contract. You would have to find someone willing to pay you as much as possible and submit the contract to the lender and see if they would be willing to accept that as payment in full. Your other option would be a “Deed in Lue of Foreclosure”. That would be where you would voluntarily give the lender back the property and accept it as payment in full for the mortgage. Be sure if you do that you get something in writing from them showing proof that it won’t be recorded as a foreclosure.
    Any way it goes it won’t be good for you but much better than a foreclosure.

    Good luck,

  2. Reply
    ga_rei_guy
    April 29, 2011 at 10:32 pm

    Neither of these solutions is a good alternative for you! Short sale is probably not a viable option for an investor to come in if you meet the following criteria:
    1. are current on your mortgage
    2. the house is in good condition
    Short sales are best accomplished when the loan holder has somone is behind on their payments and the house probably won’t bring in close to what is owed because of its’ condition. It doesn’t sound like you meet that criteria. Otherwise, the loan holder will just foreclose and take their chances either at the auction steps or turn it over to a realtor for them to sell.

    Foreclosure is going to linger on your credit for a long time.

    Either of these scenarios is going to result in you losing your home.

    My suggestion would be as follows:

    1. Talk to your current lender and see what can be done. They are probably more willing to work out something with you, especially if you explain your situation.

    2. If you can’t work out something witht he lender, then go to a real estate investor like myself who might be willing to purchase the property creatively and thereby saving your credit.

    Hope that helps

  3. Reply
    Nadia S
    April 29, 2011 at 10:37 pm

    Interest rates are getting lower and lower. In fact they are suppose to go down again this week.
    YOu need to refinance ASAP and get a fixed mortgage. Your payments will remain the same always.
    Don’t touch your savings (unless you can do 20% payment on the house, which I don’t see how you could).
    Even if you pay the PMI (around $ 100 month), your payment should still be considerably smaller than what you are paying now.

  4. Reply
    john e
    April 29, 2011 at 10:46 pm

    You should probably walk. It is against your instincts but just count what you paid as rent with option to continue payments.
    If you refinance the bank will say thank you for your 20-25k and your payments will be the same. The appraisal will come in at 240 and . . . . . . . .

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