I was speaking recently with our mortgage broker about the fact we have several clients who bought their home when they didn’t have children or had one child and now have several children. They have literally grown out of their home. Unfortunately, due to the market, their homes are now worth less than when they bought and they owe more on their home than what it is worth. They are fortunate as they have not lost their jobs and are able to continue making their house payments. They don’t have the money to buy another home without selling theirs first. However, they cannot sell their home without it being a short sale and hurting their credit.
The ultimate question: “How can I buy a larger home to accommodate my growing family while the home I have is underwater (price is less than loan amount)?”
According to Scott Eaton from Landmark Mortgage in Pleasanton, the way to do this is to rent your current home and purchase a new home. You can put as little as 3.5% down with FHA financing on the purchase. The new purchase must be a move up. If your income can support the debt on both homes, within debt to income guidelines, this is the route to take. Gifts from family members are allowed. The more money for a down payment you have, the easier the qualifying is for you. If your income is not enough then we may need to factor in the rent you will receive on the existing house. In order to take this route you must have proof of renting the place for a period of time (6 months to a year). So perhaps you move into a rental, rent your house out and get the rent clock ticking. After at least 6 months you can purchase a new home.
Please feel free to call or email us with any questions. The sooner you take action by finding out what is possible for you, the sooner you can be in a larger home for you and your growing family.