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Opinions on the best way to handle non-reaffirmed house

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    Opinions on the best way to handle non-reaffirmed house

    I am still a year away from being able to purchase a new home and to be honest it may end up longer than that but I started to wonder what others have done in my situation.

    I did not reaffirm my mortgage when I filed so currently I am just going along as usual and feel really good that I did not. My house has a bunch of stuff that needs repaired / updated before I could sell it. That would offset to an extent the amount that it's value has risen. Considering I might possibly only break even I am wondering if it's worth the hassle. So my question in regards to that is if you wouldn't come out ahead on selling a non reaffirmed house are there still any advantages to doing so anyways?

    If there is no advantage would it be possible to just stop paying through the foreclosure process and use the money to put down on a new house. I know that process can take awhile so it could be a nice chunk of money, enough to at least pay the closing costs. Has anyone done that before?

    Last question, what kind of repercussions does any of this have in regards to the new lender? I wasn't sure if walking away could impact your approval or not? I for sure would get approved prior to doing anything else though.

    #2
    As you have correctly pointed out, home values have increased--a lot--since the market bottomed out around 2010-2012. You should do your due diligence to find out if you can make money selling the house, or at least cover your costs. Also, it is not your responsibility to "update" anything, and a prospective buyer might not like your idea of "updating" anyways. You really only need to be worried about repairs which would be necessary to pass a home inspection.

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      #3
      Thanks for responding!

      That makes sense in regards to doing anything even repairs to the "banks" house. Do you know anything in regards to my last question? I wasn't sure if I let it go through the foreclosure process and used the money to say pay closing costs if it would cause a red flag to a new lender? Or if they don't even pay much attention to a non reaffirmed house.

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        #4
        Be prepared to wait 3 years if you foreclose. They do NOT like that even if it doesn't show on your credit report they still see the lien.

        If you don't sell they're going to want to see cancelled checks as proof of payment for at least 12 months.

        If you want the financial advantage you'll have to stew for a while in a rental after the foreclosure is done.

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          #5
          My wife and I are actually considering to move out of state and renting for her possible new job. I would attempt to sell the house regardless but if the risk of foreclosure and a waiting period would be such a big deal all things considered. My situation is how much money would need put into the house to break even. So it's the main reason I considered the "walk away" option in the first place. I am glad you responded though as it sounds like even if I DID break even it might be worth the hassle. Albeit I got a feeling I would have to put about 20-30k into it and roll the dice as the foundation is having issues.

          So ya this situation might be a bit unique, what's your opinion on how to handle it if you don't plan on buying for several years? Would you throw a bunch of money at it and hope for the best, or let it go considering that you wouldn't be taking on a new mortgage for possibly 5 years?

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            #6
            I would get some estimates for the work which is needed in order to pass a home inspection, and talk to a real estate agent to see what you could realistically sell the house for with only necessary repairs being done. If the loss to sell ends up being only a few thousand dollars, it's worth that to avoid a foreclosure. If it's going to be $10k or more, I'd cut my losses and walk.

            Remember that in many parts of the country, it costs a lot more per month to rent than to own a similar home. In that situation, it makes sense to avoid being forced to rent any longer than you have to in order to decide if you want to live in the new location for a long time. Avoiding foreclosure on your existing house does have value, but for you, I'd say that value is somewhere around $5-6k. Hence, my recommendation to walk away if it's going to take a lot more than that to sell the house.

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              #7
              That makes sense and the "would I even break even" thought crossed my mind as well. Ya I understand the rent vs own cost as I have compared them locally and could not rent anything close to what I have for the same price. My situation would be moving to an area with a large increase in income. So the idea behind renting in that case would be easier to handle. The few possible area's I have never visited so not only does that cause some apprehension but also I am still not far enough away from my discharge date to even consider another mortgage. So taking a loss in the end isn't worth the history of a foreclosure in my case? I know it won't show up on my credit, but figured after several years away from it I might be able to qualify, especially with a chunk of money down. Thanks for the help!

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