Expert: Dick Dennis - 6/10/2009

Question
Dick, I grew up in the home I currently own. I bought it from my mother about 12 years ago. I have refinanced it a few times to lower my monthly bills now I owe roughly $105K on a home worth around $75K. My live-in girlfriend and soon to be fiance along with her 2 boys live with me. The house is beginning to show signs of wear and tear. I have done some major improvements but there is no way I can sell and get what I owe. The house is small but has a great location. She just lost her job and we need to move closer to a large city for easier employment. What should I do with this property? I have excellent credit but not a secure job right now and no money in the bank.

Answer
In today's real estate market, Shane, it is very doubtful you will be able to get even what you owe on your mortgage. You are now going to have to really ask yourself what you should be doing. If you can still afford your payments, then I recommend you continue paying them. After all, you have to live some place, so it might as well be a home you own yourself rather than having to pay rent to someone else.

If you contact a GOOD local Realtor and find out what you can sell the property for, you will be advised to sell your house on a "short sale." That means the lender will have to accept less than to what he is entitled and you will get nothing upon the sale of the property. My guess somewhere around $65K to $80K. The lower the price, the faster the property will sell and then you will be able to go find another house to either buy or rent. If you buy, then you may as well stay where you are. You won't have to qualify for loan all over again. FHA has a program that allows you refi at a lower rate, so you may want to check into that with your nearest bank, mortgage broker or Realtor. You may want to talk to your lender and ask them what chances you may have of getting your payments reduced and/or the amount you owed reduced. But some lenders are reluctant to do that if you have not been late at any time with your payments. A good Realtor can handle all this for you. If you elect to go the short-sale route, your credit may get dinged by about 50-80 points. I do wish you well.

Dick Dennis
Dixiedee13@aol.com