A little upside down but need and can afford bigger home

matt8085 · Joined: 16 Feb 2010 Posts: 3

Hello all,

I'm currently 4.5 years into an FHA loan (30 year fixed @ 6.00) where 160k is owed on our condo. Problem is I probably can't get 160k for it, as prices have pretty much plummeted. Financially, things have actually improved for our family. We make more money now than we did when we took the loan out and can afford a significantly bigger mortgage payment. Our credit is very good. No blemishes, scores in the high 700's to low 800's. We have had a child since we bought our condo and this place is really too small for us now.

That all being said, is there ANY option other than a short sale? I mean in the auto loan industry, if your upside down on your car loan. you can walk into a dealership and drive out with a new car with the difference rolled into the new loan. Is there nothing similar to this in the mortgage industry?
Thanks in advance for any assistance.

TimtheMortgageGuy · Joined: 16 Jan 2008 Posts: 96 Location: Rosemount, MN

matt8085 wrote: Hello all,

I'm currently 4.5 years into an FHA loan (30 year fixed @ 6.00) where 160k is owed on our condo. Problem is I probably can't get 160k for it, as prices have pretty much plummeted. Financially, things have actually improved for our family. We make more money now than we did when we took the loan out and can afford a significantly bigger mortgage payment. Our credit is very good. No blemishes, scores in the high 700's to low 800's. We have had a child since we bought our condo and this place is really too small for us now.

That all being said, is there ANY option other than a short sale? I mean in the auto loan industry, if your upside down on your car loan. you can walk into a dealership and drive out with a new car with the difference rolled into the new loan. Is there nothing similar to this in the mortgage industry?
Thanks in advance for any assistance.

Your option is to bring cash to closing to cover the difference. You could get a loan to accomplish this if needed. You will probably need a down payment on the new home, so keep that in mind too.

m2c · Joined: 03 Aug 2005 Posts: 937

Not to add more joy to your predicament but “good luck” getting your sale financed if the purchaser is going FHA. New FHA rules are fun but your condo project may luck out if approved. If hear “condo” and head the other direction even if conventional (will listen to a 25% conventional condo buyer).

The upside down financing mentality of the auto industry I guess is due to higher market ups, auto manufacturers financing arms back dooring the profit to the manufacturing profit, and the relative speed and low cost of repossessing automobiles on default.
Cash is king to lubricate the sale of your condo. Other possibility is to ask current lender about a short sale with a cognovit note or second mortgage on your new home for the difference.

matt8085 · Joined: 16 Feb 2010 Posts: 3

Thanks for the replies. Found out that our condo is in fact FHA friendly for potential buyers. We probably have enough cash to cover the difference and avoid a short sale, but that would likely leave us with not enough for the DP on the new home.