Homeowner in dire straits

[sre94]

Here's my situation: I had a lot of personal debt, but I decided to buy a one bedroom condo earlier this year. One, because it was a good deal, and also I felt I could get rid or my debt later on by getting a home equity loan. Bought the place for $200,000, comps in the area were $255,000. I knew there would be some rough patches for the first few months until I could get a HELOC, but I also had a friend staying with me until his marriage and he was paying $625 a month.

Seven months later, I was in the process of getting a loan, but it was denied today because my condo complex has less than 50% owner occupancy. My loan officer is trying to talk with another bank, but I have a bad feeling it's not going through. My score has slipped in the past few months, because I had some unexpected expenses, and I have fallen behind on my bills. Now, my monthly payments almost exceed my income, and I use the maximum number of tax deductions! They would in fact exceed my income if I had not have gotten a second job. I really see no way out of this. I have an expensive car I would be willing to sell to save money, but it's now got a lot of problems that need to be fixed. Trouble is, I can't afford to pay for those fixes, so how am I supposed to sell the car without taking a huge loss?

What are my options if I can't get a HELOC?

[Squantum]

sre94, your option would be to see where your money is going now, and see where you can cut back. Do you track expenses now? Can you share?

You can cut back on non-essentials, such as: cable TV, netflix, other entertainment expenses, cellphone or home phone (one or the other), travel, clothing purchases, eating out (including coffees out), convenience foods in your grocery budget. How much do you spend on non-essentials currently? if you cut down on these items, could you make it a lot more easily?

If you have student loans and things are very tight, you could ask for forbearance for a few months -- interest does continue to accrue, but you won't be in default.

Those are some other options!

[HalMd]

Can you stay with the friend and rent your condo out for 6 months or a year?

[LuxLiving]

Can you find another roommate?

[creditcardfree]

Sell the condo? Sounds like you bought a home you could not afford. Get out as soon as possible. Renting to a roommate, or moving out and renting are good options. You really need to be realistic about whether you can afford this condo.

Selling the car at a loss may be what you need to do to get your head above water. Put all options on the table. You made a mistake and now you will need to fix it.

[sre94]

Thank you for all the suggestions, but none are really viable options. There is really nowhere that I can cut back on spending, since I hardly spend any money on myself as it is! I've bought hardly any non-necessity items since June, and often I eat like a poor college student. The only thing I could really get rid of is cable.

Can't rent out the condo, since what I would get back would be nowhere near what I pay on the mortgage. I could look into getting another roommate, but I probably won't be able to charge that much since they wouldn't have a room. My other roommate took the bedroom and I slept in the front room, but that was a different situation because he was only there two nights a week, and very accomdating since we're best friends.

What I really need is the relieve my debt load. Are there any lenders out there who grant home equity loans more easily, at a higher interest rate?

[creditcardfree]

I'm sorry to be blunt, but the only way to relieve your debt load is to pay it off. Moving debt around to hold on to a home you can't afford is only delaying your future foreclosure.

I am proud that you did get a second job. Not all people in your situation would do that, so I commend you on your efforts there. Is there any prospect of increased income in the future? Do you have anything you can sell to pay off debt?

Really look hard at your budget at things that could be lowered expense wise. Lower homeowner's insurance, auto insurance, health insurance, utilities (go ahead and cut the cable), transportation costs, entertainment expenses. Look at everything. A few dollars here and there could add up to $50 or more a month.

Tell us more about your situation. Income and Expenses. Maybe we could see something you don't see.

[Ima saver]

Can you sell the condo? It seems like that is your only answer.

[LuxLiving]

So even with a roommate who you'd give the bedroom to you can't cut the payments???

Meaning whatever you'd get from them and what you'd put in yourself you can't make it? Then sounds as if you'd need to sell and quickly. Call the realtor today! Meanwhile keep working on getting the HELOC. But even if you arrange for the HELOC you're still going to be in debt up to your eyeballs it sounds like!

While you're on the horn go ahead and list the car in your local auto trader magazine. Better out of it soonest!!

The longer you sit waiting for something good to happen the worse things can get. Sounds as if you need to be very proactive to get something sold quickly to give yourself some relief.

Good luck to you...and DO go ahead and post your particulars here - maybe someone else can spot an out for you.

[sre94]

Here's the monthly breakdown:

Mortgage= 1475
HOA= 160
Credit cards and loans= 1100
Car= 435
Cable= 121
Energy= 21
Cell= 55

Total financial obligations= 3366
Income at first job- 3244
Income at second job- Roughly 720 (I make tips)

***actually, right now my obligations are higher because I'm behind on some bills and over my credit limit, and the payments are higher

[creditcardfree]

How much do you spend on food? Insurance? What kind of repairs need to be done on your car? Is the cell a necessity? Are those incomes net? I have lots of questions. Just trying to help!

[Fizgig]

If your income is $4000, and your obligations are $3350, what's the problem? Daily living expenses like food, gas, etc. aren't listed. Is that what's putting you over the edge? It's a bummer, but it looks like the cable has to go, and maybe you can also get a cheaper cell plan.

Please don't look for another loan to solve your debt problems - it will just add to it. Are you behind on the car payments? If so, it may be better to take the loss of selling it now rather than the bigger loss if it gets repossessed. They'll sell it to a dealer for less than you could get in a private sale, and you'll still owe the difference in the loan.

[tinapbeana]

what about food, transport, etc? IMO, cutting the cable is a good 1st step. i'd also look into trading down on the car, see if you can get something w/ monthly payments below 3, closer to 2 if possible. or, do you live in a place that you can get by w/out a car altogether? cutting the cable & getting down to 3/mo on the car will give you an extra $250/mo to catch up on bills etc. that's a pretty big chunk of change.

also (and i'm pretty sure you own't want to hear this but i have to say it anyways), having a mortgage payment more than 1/3 of your income is playing with fire. before the 2nd job, the mortgage was more than 45% of your income, now it's at over 37%.... if it were me i would seriously consider selling the codo altogether.

[Squantum]

You must have some other expenses. Your listed expenses are lower than your income. I guess these are just your "bills"? If you got rid of cable, you could save about $1400/year -- roughly one mortgage payment. That's not insignificant!

[Fizgig]

Originally Posted by tinapbeana

also (and i'm pretty sure you own't want to hear this but i have to say it anyways), having a mortgage payment more than 1/3 of your income is playing with fire. before the 2nd job, the mortgage was more than 45% of your income, now it's at over 37%.... if it were me i would seriously consider selling the codo altogether.

That's a really good point, and don't forget about the HOA of $160/mo. That makes his payment 50% of his income with the first job only. I'm guessing that the second job is just a catch-up necessity - most people don't want to work two jobs as a constant way of life. (I know I wouldn't.) I wonder if his mortgage includes taxes and insurance.

Sometimes owning isn't the right choice. You say that you got the place cheap - could you make any profit if you sold it, maybe pay down some of the debts and rent someplace cheaper? The high unoccupancy rate makes me worry, though. It really does seem like the condo is just unaffordable.

By the way - what type of mortgage do you have on the condo? Fixed, adjustable, what term?

[LuxLiving]

Can you find yourself a good leasing manager? Or, go to nolo.com and get yourself a good lease form. At the same time you sign up to sell it you might try also leasing it out.
Whether a buyer or a leaser comes your way you're already on your way to a solution.

[sarah]

Have you considered credit counseling. There are some good programs out there. CCCS through United Way has a very good reputation. They may be able to negotiatie lowered debt and credit card payments. I used them when I was just out of graduate school and desperate. Please be careful though any credit counseling that charges an ongoing fee is probably not worth it.

[sre94]

Originally Posted by sarah

Have you considered credit counseling. There are some good programs out there. CCCS through United Way has a very good reputation. They may be able to negotiatie lowered debt and credit card payments. I used them when I was just out of graduate school and desperate. Please be careful though any credit counseling that charges an ongoing fee is probably not worth it.

I have considered credit counseling as a last option. I just don't like what it will do to my score. I would still rather get a HELOC, and stay in this condo because of all the benefits of home ownership. I bought it back in March, but prices here in San Diego have dropped since then.

If I can't get a HELOC though, I will look at credit counseling, just to get my head above water.

[wannabefree]

Why can't you sell your car and get something inexpensive to free up a little more cash. I would cancel the cable tomorrow and I would get your condo on the market

[geojen]

You need to make some hard choices. Staying in your condo for the homeowner benefits will not outway the financial downsides you are describing. Housing should never account for 50% of your income. Same with the expensive car. Taking on more debt (the HELOC) is just putting a bandaid on your problem. You can't solve debt problems by taking on more debt. Just my humble opinion.