Expert: Sue Bernstein - 4/6/2008

Question
We bought a condo two years ago with the hope of buying a bigger one after we got married. Now we are ready, but the market is down and we will not be able to sell our house for what we owe. We're making payments fine, so a short-sale isn't an option. We've considered trying to offer it as a lease option. Would it be possible qualify for a second mortgage by using our first home as rental income to offset its debt? Our income wouldn't otherwise allow us to qualify for TWO mortgages. We would be okay with offering it for sale or lease again if they choose not to exercise the option at the end of two years. This is risky but seems like our only option.

Answer
Hi Katie,

Talk with a lender and see if you qualify for a new home if you rent out yours.  I would not do a lease option as it is unknown what the value will be at that time and with a lease option you could lose a considerable amount of money if the market bounces back.  It the market continues to fall the prospective buyer won't exercise the option anyway.  Just figure out what your unit will rent for and make sure you can afford a few months vacancy if need be.

Hope this helps.

Sue Bernstein