Owe more than house worth..and moving to new state

[thefinest]

We live in PA and my hubby is taking a job in another state. We currently own 3 houses. We owe $305,000 on our primary residence. The market has fallen here and I don't see the house selling for anymore than 260K before commissions etc. We would definitely lose at least $45-80K on the sale. We also own 2 rental properties that would probably sell for what we owe on them.

We have very good credit scores..around 750. We are current with all debt. We have been debating on what to do. I don't want to ruin our credit but my hubby is very seriously considering walking away from at least our primary residence. Could we continue paying our mortgage and buy a new house in the new state before we stop making payments on our PA home? If we did this could the lender come after our new home?

We could conceivably, rent a house in the new state for cheap and continue making our mortgage payments here until the house sold but I just don't know if it's worth it to lose $45-80K.

Also, if we did the "walk away", should be do the same for our rentals too just to get out from under all our property or would that make our credit score even worse?

[hereforinfo]

Yes, 3 foreclosures is worse than 1 on your credit report.

I doubt you could buy a new house and then walk from the other one. That is what we call "buy and bail" and lenders are taking a hard stance against it. It is now much harder get approval on a new mortgage if you have another property that doesn't have a great deal of equity. Unless you have the income to support both mortgage payments, plus several months of reserves, they won't approve a new mortgage.

There are definitely consequences to foreclosure. Depending on whether you are in a recourse state, there's always the chance the lender could sue you for the deficiency balance. Or they could forgive it and send you a 1099 which could potentially make it taxable income. You could attempt to negotiate with the bank to accept a short sale, but you should definitely find out if there would be any tax liabilities on the difference first.

Once you have a foreclosure, you can't get a new mortgage for 3-7 years. The clock starts when the title goes back to the bank, which is typically at the end of the foreclosure process (which can take a year or two in some cases, so that delays your eligibility even further). A short sale will also hurt your credit, but not as bad as foreclosure. You could be eligible for a new mortgage 2-4 years after a short sale.

If the 2 rentals aren't underwater, then by all means don't foreclose if you can sell them and break even. The foreclosure may cost you a lot more.