Hi everyone! I just found this forum and I'm hoping you all can help me.
I have a house that I owe $155,000 on. I could probably sell it for around $135,000. I do not have the funds to cover what I will lose.
Now, it's the tricky part...My daughter started kindergarten this year and the house is in THE WORST school district ever. So we moved to an apartment in a GREAT school district instead of paying for private school.
We just rented out the house for about $300 less than what we owe for the mortgage + taxes & insurance every month. The man that is renting out the house has signed a 1 year contract. The plan was for us to SAVE SAVE SAVE so 1 year from now, we could sell the house and then buy a new one.
Now, my question is...Should I just keep renting out the house and try to buy a new house with the money we save? Can I do this? How hard is it to get a mortgage on a new house when I already have 1 mortgage with a renter? How much down payment would I need? 20%, I assume... More?
What would you do?
Would you continue to rent out the house forever and buy another house that you and your family could live in? Or would you save for 1 year, sell the house at a loss, but then you'd be free to buy a new house with no other mortgage on your credit?
Thanks in advance!!!!!!
Fri Oct 14, 2011 2:06 pm
Dan203 New Poster
Cash: $ 0.65
Joined: 14 Oct 2011
You really don't want to take a loss every month on the old house. Trust me I'm doing it now on two properties and it drives me insane. Taking that loss is effecting what I can spend on my own house and what I can do and buy for my family. It sucks and if there was any way I could get out of it I would.
To answer your other question about what you need to buy another house while keeping your current one as a rental... First off you need the full 20% down. Secondly they need you to show that you have enough money in the bank to cover 6 months of mortgage payments on both houses even without a renter. This is to prevent something they call "buy and bail", where someone will buy a new house while there credit is still good, claiming they will rent the old one, then once the new house closes they stop paying the mortgage on the old one and let it go to foreclosure. My lender not only made me show adequate funds when I bought my current house, but they also made me write a letter promising I wasn't going to "buy and bail" so they could prove fraud if I did.
Also don't forget closing costs and, unless you're buying a brand new house, you're probably also going to want some saving to pay for improvements to the new house you buy. I spent about $15K on improvements in the first few months after I bought my house. (fixing a few issues, painting, landscaping, etc...)
Fri Oct 14, 2011 6:21 pm
jen5 New Poster
Cash: $ 0.45
Joined: 14 Oct 2011
Thanks for the response, Dan!
You really make me think that I probably want to wait another year, save up my cash, and sell the old house at a loss before buying a new one.