Buy and Bail: A Solution to an Upside Down Mortgage?Topic: Mortgage
"I am more than $200,000 upside down on my current home and the bank won't entertain a loan modification and I want out of this situation!"
This statement is pretty common these days.
It's hard to see your same exact home now on the market for HALF the price you paid for your home. It sure would be nice to have half the mortgage payment you have now for the same house!
The Wall Street Journal wrote this article that basically brought a hush, hush secret into the light. Every loan person knows how to do it! Banks turn their head and ignore the issue! Realtors practically endorse it! Now they want to change it?
If you are upside down on your mortgage and your mortgage was giving you some "issues" then there is a pretty good chance the thought to "Buy and Bail" has crossed your mind.
Buy- Keeping your current home and buying a new one
Bail- Once you close escrow on your new home you let your current home go into foreclosure.
Although the article states there are some changes being made to the guideline for lenders, I have been in and around the business on a daily basis I haven't seen any changes as of yet!
"So what does it all mean? How can I get it to work for me?"
(Let me state something for the record, I am actually against the "Bail" part of this as I believe you need to find out every option you have before you pack up and leave)
* Understand what it takes to buy: The general rule of thumb is that you will need to buy a bigger home (in square footage) or be relocating to another part of the city or out of state in order to fall inside the guidelines. If you want a home that is equal to or smaller and you are NOT relocating then chances are you will have some trouble buying a new home.
* Bail: Accomplish this with limited impact to your credit: I know the popular choice is to go ahead and start missing payments on your home but before you do this obviously you will need to buy first. Once that is done you will need to address your mortgage company properly. One of the best ways to bail will be with a short-refinance. This is similar to a short sale but you can arrange for a negotiation with the current lender by an attorney for an affordable fee! To make this scenario that much more appealing, it is possible to have this go through WITHOUT missing any payments! I know you want to get rid of the property, so read more a short refinance here.
* Take advantage of this window of opportunity: The rule they plan on changing will make you financially responsible for both payments you old house and your new one.
I will leave you with this, take advantage of this scenario but do so in an ethical way. The banks/lenders may not seem to be helpful on the outside but you can get them to work with you if the information is presented to them properly. Seek professional advice because that will be the difference between success and failure!
Brent Lane The Lane Group http://www.thelanegroup.blogspot.com
About the Author
I am located in Roseville, CA just outside of Sacramento and I have been in Mortgage and Real Estate since 2000. In that time I have been a Mortgage Broker working for my 4th company. I have closed over 700 loans in my time and I have seen many more. I am not sure how to gain the title of Expert but I have to be close! I deal in mortgage "solutions" every day for a diverse group of people.
Please provide us with your opinion on this article:
A short sale will lower your credit score by 100 or more poitns.You do need to show a hardship to the lender in order to qualify or get the ok from the lender to short sale your house.Short sales are NOT a quick way to get out of your house. Banks notoriously will sit on offers for months and sometimes not even approve of any of them in the end, which will send you into foreclosure if you stop paying on the mortgage.My guess is, if you cannot show a hardship, you are not going to be granted a short sale.You also would not be buying another house anytime soon with a short sale on your credit report.Just because you are underwater does not mean you can get out from under your obligation.
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