I did a mortgage for Barbara and Jimmy 5 years ago and they wanted to purchase another home, as their two-bedroom ranch was just too small. They weren’t sure if they should sell or rent. I had an appraiser do a comparable check for me, sure enough, the debt was slightly higher than the value.
Their mortgage payment was $989 per month, but the home would rent for $1,000. I explained to them, the rental income could not be used in the qualifying process for another home. With this $989 debt and what a new mortgage payment would be, they didn’t qualify for the estimated new mortgage. They were not willing to do a short sale, as they wanted to protect their credit.
The decision was made to list their existing home and pay the shortfall. It took two weeks to find a buyer. We estimated they would need $16,000 as their shortfall, which they had. They were able to find a home that met their family needs, which required $8,100 down. They had presented the offer with the seller paying their closing costs. We proceeded with a new mortgage, which went pretty well.
This past Thursday, both properties closed and they are moving into their new home this weekend. Many families have to make decisions about selling a home that is underwater. None of these decisions are easy. Not everyone has the money to pay the difference as Barbara and Jimmy did.
Check out this article for more statistics on underwater homes: