Yesterday I got two inquiries from folks who were considering walking away from their current under-water homes and they wanted to know about the possibility of buying another home given the great prices we now have in many areas.
That’s a financing question, “Will lenders lend me money after I walk away?”, so I emailed a mortgage expert.
John,
Freddie Mac & Fannie Mae say that if you do a short sale, they will look at you again in two years assuming everything else is good regarding credit, income, etc. If it is a foreclosure it is 4-5 years with Freddie & Fannie from the trustee sale.
On a FHA loan it needs to be 3 years from the trustee sale & good credit thereafter.
I hope this helps,
Thank You
–
Lonny K. Gibson
Core Mortgage Group
15333 North Pima Road # 300
Scottsdale, Az 85260
602-321-2282
Now, there is the outside chance that you can find a seller with a home you want to buy who is willing to be the bank and finance your purchase, a “carryback” loan, but that is a deep subject.
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jill 06.04.09 at 5:58 am
What bank would EVER lend to someone who walked away from a secured loan? I am so disgusted by this behavior. Loan’s — especially 2nd lines, etc.— are also based on one’s committment to repay, and clearly, those who “WALK AWAY” ( Is that the nice way to say ‘defaulted’?), clearly have no regard for contracts they have entered into.
Jim 06.04.09 at 6:32 am
Well it might be possible, but it shouldn’t be under any circumstance. If you screwed up get over it. Suck it up and deal with it.
Larry 06.04.09 at 9:39 am
Sounds like someone’s doing research for ACORN!
Randy 06.04.09 at 10:10 am
Sounds like some people are blind to reality…not all people that are upside down are that way by any fault of their own. There are situations where people did put down 20%+ and have seen thier home values plummet by 50% or more. In a situation like this, do you continue to throw good money after bad? From a purely financial perspective, it might make sense to short-sell or “walk-away”. This action does not come without consequences. Seeking an understanding of those consequences is nothing more than good due dilligence.
jill 06.04.09 at 11:51 am
Randy,
Yes, one SHOULD continue to honor the loan based on the value of their house ( or rental property) at the time of purchase. If said people made a committment to pay off the loan, that’s what banks should be able to expect. However, I continue to be shocked at how selfish society is, and this “walk-away” mentality is hurting everyone —especially those with enough honor to pay their loans - even if they are upside down too. I have seen many people around me “walk - away”. It’s so refreshing to see them on their way to a 2 -3 week Disney vacation in their brand new cars while we continue to save and pay as we vacation at home in our 10 year old van.
If it were me:
1) NO loans for defaulters for at least 7 years, and excellent credit scores.
2) If someone speculated and bought a “rental property” to cash in, and walks away from it - their primary house should also be used as collateral.
Can anyone tell I’m peeved? Thanks for listening, I actually feel a little better, and I didn’t verbally hurt someones feelings.
Paul 06.04.09 at 12:50 pm
to anyone who is thinking of ‘walking away’ because you are under water…
when you bought the house, you must have thought it was worth what you were paying for it, if you were stupid enough to think you could turn it, pay nothing down, interest only loan or any of the other ***t and cut a fat hog…too bad, you & the lender should go down together.
…I might add, after buying that house, you continue to buy new cars, continued to take expensive vacations, continued to rack up credit card debt and now you want someone to cry for you!!!
mimi 06.04.09 at 10:56 pm
well, this is a selfish society and we should be selfish to some degrees. after all we have to take care of ourselves before we honor so called contract. I never think dignity come before survival. if i loose my ability to pay, if the house is truly so much underwater, I am not going to drain my account to pay the mortgage before I feed the family. not everybody got a rental home, some people got a home because they feared the house would be even more expensive. why is it ok for a bank to raise my credit card rate from 8.9 to 18 % while i am still having 800 credit score, they want more money, they want more profit, they are protecting their bottom line. why GM declare bankruptcy or other biz do the same without hesitation? it is a business decision. why is not ok for me to protect my bottom line to save myself $100,000s by walking away? just because that paper i signed says I have to pay? You can only stick through in a SENSIBLE way, but, if you decided you would rather suffer than making some hard choices, of course it is up to you and all the power to the banks who at first played all the exotic games dragged us into this mess.
Linda 06.06.09 at 1:06 pm
For those who did the right thing, full loan doc, 20% down and an appraisal BY the lender, and who are now under water 100’s, because of these banking lenders PREDATORY practices causing the markets to rise fraudulantly, only to have the bottom drop out because of them. Isn’t it reasonable to surmise we home buyers were FRAUDULANTLY mislead to enter into these contracts to begin with?
MY 08.08.09 at 8:31 am
There is always a price for doing the “Right Thing”, depending what is the right thing is? it seems like there is a justifications for everything as long as we are not talking about the same “Right Thing”!
Imagine if you have a 2 story ship and one person at the bottom made a hole to drink, what will happen to the rest of the people on the ship?
I hope this help!
hotwater 06.26.10 at 12:14 am
So it’s OK to bail out big businesses, but not help the American People who bought a home and lost all their equity and some. My home dropped $400,000. B of A won’t help us by giving us a decent interest rate or anything. We have an interest only loan. We want to do what is right, but when the loan matures and becomes PITI we will really be hurting. Is it worth staying in a home that we will never be able to pay off? Yes, we made mistakes, but so did AIG and other big companys. They got their bail out. Why can’t we get some kind of help!