Upside down in condo, need something bigger- need advice

[steve85]

Some background:
I bought a condo in 06.
paid 146k, 80 wells fargo 6.4%/20 citimortgage 8% (really smart, I know)
currently owe 111k/28k, I'd be lucky if I could get 125k for it today, subtract commmision and 119k is best case scenario.

I have 15k in extra savings, not including 6mos EF. Steady job that I will not lose, I'm able to save 1k bi-weekly.

Wife has been bit by the pregnancy bug and really wants kids soon, the condo is 1 bedroom and will NOT work. I'm looking to save for a few more months then move on something.

Can I list my place, sell it short and sign a promissory note with the 2nd lien holder for the full balance without taking a hit to my credit?


I'm fairly confident I could get approved on a 2nd home but I could not rent the condo out for the 1st mortgage, let alone the 2nd and association. Once the wife gets further into the pregnancy the second income will be gone and we would not be able to afford both the condo and another house. I could try to sell it short at that point but I don't know how much success I would have as I've heard pregnancy doesn't count as a hardship

I'd like to go with my first option, as thats the ethical thing to do- assuming I wouldn't take a credit hit and could buy another place immediately after.

Anyone care to weigh in?

Thanks

[wincrasher]

I think that if you have a choice to wait a few years, you can probably get out of your condo without taking a loss or wrecking your credit.

You are on a good path with your savings. Keep it up - you'll need a lot more when you have a kid.

Lots of people are doing short sales because they are in desperate straights. You are not and can obviously afford to stay in your condo. Wait it out and protect your credit.

[disneysteve]

I agree. Don't wreck your credit and lose the money you'll lose in a short sale. There is no reason you can't have a baby in a 1-br condo. When the kid is older and out of a crib, I can see wanting more space, but for now, I'd stay put.

[steve85]

The big problem with staying and having a baby is the dogs, they bark the baby wakes up. In a bigger house I could keep the dogs on the other end of the house on the 1st fl and it wouldn't be a problem.

With housing prices and interest rates low it may be worth it to me in the long run to take a credit hit now, the wife is not attached the the condo and she has perfect credit. I'd bounce back in as little as a year or 2. I'd like to avoid doing a "short sale" and pay the bank what their owed, I guess I could call them and find out about a promissory note or some other sort of unsecured loan if I sell for less than what Is owed. I can handle a higher mortgage + another note no problem, just have no experience setting something like that up.

I'm also waiting to see if the tax credit will be extended to all home buyers, theres talks of it being upped to 15k even. If that happens I should be able to cover the difference and have money to put down on another place.

[buildmybudget]

Where have you seen talks of the tax credit being raised to 15k? I think you need to create an old-fashioned list of pro's and con's and prioritize what's important to you. Good credit, good sleep at night, "enough" room, savings in the bank...unfortunately you may not be able to have them all.

[wincrasher]

Well just do the math - your mortage note cannot be greater than 31% of your AGI. Total monthly debt payments cannot be greater than 41%. You'll need 20% down for a conventional loan.

You need to understand how they will treat your condo note when you apply for a new mortage for a new house. Is it included in the calculations if it is up for sale? I'm sure it is if you intend to keep it and rent it out - but then you'll have to also prove 30% equity in the property. If you go short sale + promissary note, then the note value would be in your calculations.

It gets complicated, obviously. I wouldn't do it. If I had to choose kid or the dogs, I get rid of the dogs and sit tight.

[momof1in150]

For a short sale to go through you need to show hardship - too small of a space is not a legitimate hardship. Short sales aren't not an easy process. They can take from 60 - 180 days to process. They are tedious and put a ding on your credit and will prevent you from buying a house for 2 years, even with the promissory note. Most banks aren't requiring a promissory note because of the hardship that is shown.

I am a REALTOR that deals with this on a daily basis - it is not a short term fix by any means.

[creditcardfree]

Originally Posted by steve85

The big problem with staying and having a baby is the dogs, they bark the baby wakes up. In a bigger house I could keep the dogs on the other end of the house on the 1st fl and it wouldn't be a problem.

What you are saying here is that you are willing to take a financial hit for your dogs. You don't HAVE to keep your dogs. Babies sleep through lots of stuff...my babies both slept at loud wedding receptions.

I'm not saying to get rid of your pets, because I know they are family members...but be careful what excuses you use to convince yourself to upgrade.

Since, your wife isn't pregnant yet, you have at least 9 months before a baby arrives and at least a year after that before you may NEED to move. I would hold tight, save your money and hope the market recovers some!!

[LivingAlmostLarge]

Why not sell the condo and bring cash to the table? Or lose most of the DP?

[Joan.of.the.Arch]

Your dogs are not likely to bark every time a baby sleeps, are they? Wouldn't it be only an occasional problem? If it is very frequent, I imagine those living near you in the condos would like for you to do something about the barking. Perhaps some kind of training. Then your future baby would not be disturbed either.

I would not put a newborn, vulnerable, dependent human being off in a room by itself no matter how many bedrooms I had, so a one BR condo would work.

[steve85]

Originally Posted by buildmybudget

Where have you seen talks of the tax credit being raised to 15k? I think you need to create an old-fashioned list of pro's and con's and prioritize what's important to you. Good credit, good sleep at night, "enough" room, savings in the bank...unfortunately you may not be able to have them all.

I guess it's pretty much been squashed, but it may still be expanded to all buyers.

Replace the ?? with // I dont have enough posts to put an actual link:

http:??blogs.ajc.com/political-insider-jim-galloway/2009/10/20/johnny-isakson-strikes-a-compromise-on-tax-credit-for-home-buyers/

[Inkstain82]

Babies will pretty much sleep through anything. I've got an 8.5 week old in a one-bedroom apartment right now. You can slam doors and bang around as much as you want, doesn't bother him.

[steve85]

One of my dogs is a barker, the walls are very thick here between units so I haven't had any complaints. Getting rid of the dogs is not an option, unless they end up being jealous of the baby and would be a danger. I supposed I shouldn't really try to move ahead with anything unless the tax credit is in fact extended to all buyers, then I think I'll be pretty likely to do it by June '10. By then I should have enough to buy myself out of this hole, won't have much to put down though.

Thanks for the advice. I've been lurking here for a while and look forward to posting some more.

[snafu]

addendum: people in houses likewise detest lots of dog barking. Dogs are smart, they can be trained not to bark.

[cschin4]

The big problem with staying and having a baby is the dogs, they bark the baby wakes up. In a bigger house I could keep the dogs on the other end of the house on the 1st fl and it wouldn't be a problem.


You are really jumping the gun and about to make a HUGE mistake. Let me offer you my words of wisdom. TOO MANY people make the HUGE mistake of jumping into something BEFORE a baby is born. This is a HUGE mistake. Should I mention that this is a HUGE mistake?
In my experience, I see people rushing out to buy a new home, upgrade their vehicle and so forth because a baby is coming. They assume their lives will continue as they planned, such as wife continuing to work, etc. Then, their hearts and minds change where they would like one parent to stay home, work part time, etc and suddenly they have NO other options because they have exhausted and stretched their family finances to the max. Do NOT do ANYTHING until AFTER the baby is born and you have time to adjust. You can keep the baby in a bassinet, put a crib in the living room, etc until you have had a cooling off period and can really assess how you want to live your life.
Your dogs are a non-issue. Babies adjust to all kinds of sounds, etc. The way to adjust is to just allow the dogs to bark and not tip toe around and the baby will be fine.
I don't know what the rest of your finances are, but you currently owe a lot and don't have much saved. 15K not enough for a cushion.
So, if you want to sell the Condo, I recommend putting it up for sale and then renting UNTIL after the baby is born. That way, you have a cushion of money and it will prevent you from making a mistake that would take years to correct.

[TBH]

I agree with everyone else. If you had put 20% down you would not be underwater right now. Fortunately it sounds like you have the income to recover from your mistake, but it sounds like your wife is planning to stay home with the baby so you won't be so fortunate a second time.

Stay put. Pay off that second mortgage. Save enough for a reasonable down payment. THEN think about selling the condo and buying a house that you can afford with only your income.

My son slept through anything as a baby. I'd say you'll really want to get out of there by the time the baby is old enough to have his/her own room, which in our house would be about age 2. As others have pointed out, your wife isn't pregnant yet, so you have time. I would also argue that you should have a serious talk about waiting a little longer, unless your wife is already over 40. It will be so much better to start a family when some money stressers, like the condo, are behind you.

[LivingAlmostLarge]

Yep you have like 9 months until she gives birth and it goes by slow. Right now we're in month 6 and I have so much left to clean and do! Plus I'm waiting for my DH to finish school so we can clean together. He wants to organize the house and I am trying to get baby stuff all in one room.

[project15]

If you are debating throwing away $20k in this short sale due to barking dogs, why not spend $500 on training the dogs now and try to live in your current place for as long as possible? I don't know how much dog training is, but it's gotta be less than what you'll lose by selling now.

Also, I don't think the homeowner's credit will be extended for all buyers, let alone to $15k. Politicians have been throwing out this "$15k to all buyers" hope since it was originally proposed two years ago.