The first step when you're upside down in your mortgage

OH1008

I'm not sure if this is the right board to post this on. I'm looking for advice from anyone that has been in an upside down mortgage. We are currently $40,000 upside down with our home. We are wanting to relocate due to better job opportunities, and wanting to be in an area closer to family. A lot of people tell us we should just rent out our home, but we would prefer not to do that. (We could rent it out for years, and still not recoup the $40,000 we need, and would just be opening the door to possible renter problems.) We hear of so many other options: deed in lieu of foreclosure, the home affordable refinance program, the principal reduction alternatives program, short sales, forecloses, etc.

Should I contact a lawyer that specializes in real estate law first for a consultation, to see what our options may be and where we stand? Or, should I contact a real estate agent first for a consultation? Does anyone have an experience with this? TIA!

Sisugal

Unless you have 40K to bring to the table at closing (plus closing costs) you will take a hit on your credit for all other alternatives.
Contact a realtor as to the real market value of your home as it stands today.
Then talk with a real estate attorney.
Renting the home - will it rent for the mortgage+taxes+insurance (and a bit more for repairs)? If so - that is the best way to go.

Do you already have jobs in a new location?
What is your other debt situation like?
Current credit score - good or terrible?
If it is terrible - then you probably have less to lose by doing a short sale

englishtrish1

We were in a similar position last year. We were slightly more underwater than you are, we knew we didn't want to take any option that would harm our credit so we went with renting. Dh and I were lucky we have excellent credit and a downpayment for a new home, but we still had to show we had tenants before we could get a mortgage.

BlueBirdMB

You could take a hit to your credit by doing a short sale walking away altogether with a foreclosure, but personally, I find both options irresponsible and harmful to both parties.  I personally would suggest renting (although an agent friend of mine said that you have to now show 2 years proof of renting to count as income, but I'm not sure it's true) or simply waiting until you can pay off that 40k and walk away free and clear. 

jessica490

Well it doesn't seem like you NEED to move right away, so I would just wait in the meantime. Have you been putting extra towards your mortgage at all? You are underwater by a large amount so I'm not sure what timeframe you are looking to move in, but I would look into re-financing

Here is what we did about 2 years ago:

We were about $20,000 in the hole with our condo per our realtor, so my dad had heard a commercial about re-financing while underwater. We contacted the company and found out all the details, and we were able to re-finance from 6.5% to 3.5% with NO closing costs or any stipulations. Payments went from $1279/mo down to $1032/mo (currently we pay $1150 total).

We had a realtor come back this past July and she told us we are now about $10,000 in the hole, so I picked up a second job and H has been working crazy overtime and being VERY cautious about spending. We stopped contributing to our house DP fund and savings account which have a decent amount of $ in them and opened up another savings account towards our mortgage in August, and we currently have $2500 in there already by saving every extra dime. We hope to sell by springtime, so we should break even.

It's a lot of work to get out of it, but it's better than my uncle whole told us to leave a lit candle near the curtains and just walk away lol

BlueBirdMB

jessica490 said:

Well it doesn't seem like you NEED to move right away, so I would just wait in the meantime. Have you been putting extra towards your mortgage at all? You are underwater by a large amount so I'm not sure what timeframe you are looking to move in, but I would look into re-financing

Here is what we did about 2 years ago:

We were about $20,000 in the hole with our condo per our realtor, so my dad had heard a commercial about re-financing while underwater. We contacted the company and found out all the details, and we were able to re-finance from 6.5% to 3.5% with NO closing costs or any stipulations. Payments went from $1279/mo down to $1032/mo (currently we pay $1150 total).

We had a realtor come back this past July and she told us we are now about $10,000 in the hole, so I picked up a second job and H has been working crazy overtime and being VERY cautious about spending. We stopped contributing to our house DP fund and savings account which have a decent amount of $ in them and opened up another savings account towards our mortgage in August, and we currently have $2500 in there already by saving every extra dime. We hope to sell by springtime, so we should break even.

It's a lot of work to get out of it, but it's better than my uncle whole told us to leave a lit candle near the curtains and just walk away lol

I commend you for your responsibility.  This is the way to do this.

JaydenUSR

First, talk to your mortgage professional. Try to increase the chance of successfully managing your financial situation through early intervention, call your mortgage professional at the first sign of financial difficulty; Ask the mortgage professional about information on the options available for managing your financial situation; and Keep the mortgage professional informed as circumstances evolve.

Ask for the clarification of the financial picture. In order to help your mortgage professional fully understand your financial situation, before meeting with them, prepare a detailed list of financial obligations including any credit cards, loans, household bills with the amounts owing and their due dates.