I bought a house 3 years ago and then got transferred to another area unexpectedly, within 6 months. I have not missed a payment on my house loan, and have been paying rent at the new home. I tried selling the home through a realtor, however, was not successful in selling it for what I owed the bank + the commission. I then tried selling on my own, and haven't been successful there either. It is difficult to sell on my own, as I am out of the area now. I really need to get out from under this loan, as I can't purchase a new home at my new location, until I do. I have a good job, and can afford both payments right now, but really strapping me, and wasting my money renting. I was thinking of letting the house go back to the bank. I guess this would be called a foreclosure? How will this effect my credit and for how long? I am in my late 20's and have only had two other loans, which are in good standing. My credit score currently is very good. Any other options that I have? Just really need to get out from under this mortgage loan. Thanks!

If it is your goal to buy a new home in the next 3-5 years then foreclosure is not an option for you. It will destroy your credit for the next few years. Right now FHA requires 3 years removed from a foreclosure and I've heard that Fannie Mae is going to require 5 years. Can you rent out the home you are trying to sell so you don't have to carry both payments until housing prices come back to a point where you can sell it? That is your best option.

Either rent it or maybe try to advertise it as rent to own whereby someone can pay rent and purchase within a year or so.

Rent it and hope the market comes back. 

Renting the home is a good option.  Just realize that if you rent out your old home, it will help your cash flow on a monthly basis, but it doesn't sound like it would help you qualify to purchase right away.  Banks are requiring you to have 25-30% equity in the rental to be able to use the rents to qualify for a new mortgage.

 

The 25%-30% equity rule is only in your same housing market. If you can prove that you were transferred to a new housing market for work you do not have to prove any equity in the previous home now being rented and you can use the rental income to help qualify

Mike Ross:

The 25%-30% equity rule is only in your same housing market. If you can prove that you were transferred to a new housing market for work you do not have to prove any equity in the previous home now being rented and you can use the rental income to help qualify

The original Fannie Mae announcement doesn't specify that.. you can read pages 6 & 7 at https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf

 

I am not aware of any changes that allow for a move to a different housing market.  If you have something, please post it for us.

 

Thanks.

You have several options...

Rent the home. Possibly difficult if you are in another area some distance from the original property. First time/inexperienced landlords can quickly find themselves in trouble even if the tenant is top quality. Be careful with this thought.

Sell the home by owner. This is just a crazy idea unless you have a ton of experience in selling real estate. Even with experience - selling a home by owner long distance does not have a super high chance of being successful.

Sell the home through an Agent. This is probably your best option. The only issue you mentioned was that a likely sales price will result in a amount that will will not cover the mortgage plus all of your costs. This is very common right now. There are solutions. A short sale - where the lender agrees to accept less than the amount owed. A personal loan that you accept and agree to payoff over time. (a mortgage of sorts without the obligation to still own the real estate) Many lenders are writing a note that is less than the amount totally owed. For instance... you sell for $100,000 but have a mortgage and selling costs of $120,000. The bank agrees to release the mortgage and you agree to pay them some amount ....like $10,000 at $100 a month for the next 10 years. Not perfect but this is a hell of a lot better than a foreclosure.

Let the home go in a foreclosure. This will really hurt your credit for the next several years. Depending on the laws in your state you may be liable for a deficiency amount (the amount unpaid after the foreclosure sale).

Look for a job back in your original area and try to make things work through some form of a modification with the lender.

In any case stay involved and you have a better chance of comming out of this situation in a good place.

 

 

Here's a thought!  If renting your property is not an option or if the 25%-30% is not an option, explore a couple of other options.  It doesn't sound like you pursued a Short Sale on the property because the lender pays the commission, and is typically the next step when a modification of any type is not approved.

A Short Sale allows the difference or short fall between the new purchase price and the loan amount owed to be forgiven under the Mortgage Forgiveness Debt Relief Act effective through 2012. (Click on link http://www.irs.gov/individuals/article/0,,id=179414,00.html)  Assuming you do not have multiple mortgages or liens on your property-which, by the way, you will need to cure, the lender should be willing to allow a Short Sale under the circumstances.  A Short Sale can also take a few months to complete, and is subject to lender approval.  If you have assets you can liquidate to make up some of all of the short fall then do so in exchange for a "PAID IN FULL" account balance and get it in writing.  If you cannot pay cash to make up some or all of the short fall, then it will take two years of great credit management on your part before you can buy property again as I understand it.

If a Short Sale is not in the cards for you then you are left with the option of Deed-in-lieu (of foreclosure) and any short fall also falls under the Mortgage Forgiveness Debt Relief Act.  Again consider sweetening the deal for the lender and pay cash to make up for some or all of the short fall; that is, the current market value and loan amount owed in exchange for a "PAID IN FULL" account payoff which will be reflected in your credit. If you cannot pay cash to make up some or all of the short fall, then it could take 5-7 years, may be longer, of great credit management on your part before you can buy property again as I understand it.

I believe the lender just wants to be made whole so being creative and asking for what you want should be on the table.   But remember to negotiate a win-win situation for all affected if you can.

These are just suggestions for you to think about.  Consult with a Real Estate Attorney.