can i buy a second house, and after i bought it can i foreclose on my current home?

Question

my family and i are ready to move and have had are house on the market for 6 months now, are asking price is what we owe!! i make enough money to quallify for 2 homes, and really eager to get out of town. what would be the outcome if i chose to foreclose on the house i own now, would they take my second house away also??? any brokers or mortgage experts please give advice.

Answer 1

You should not go into foreclosure on any house if you can avoid it. Foreclosure means the bank sells the property at auction, and a judgement is placed upon you for court costs, fees, interest, and the remainder of the mortgage that was not covered by the sale.

Instead, it would probably be less expensive to just lower your sale price, on your first house, to below the mortgage amount, and pay the difference not covered by the sale at closing. It will mean selling at a loss, and it will cost you money to sell at the lower price. You may even need a loan to pay off the remainder of the mortgage, but it is usually better than going into foreclosure.

Another option is to keep both houses until the market turns around, and prices go up. Maybe you can move, buy your second house, and rent out the house you currently have for sale. If you are concerned about being a long distance, out of town landlord, then look for a local property manager to hire. The rent money can help make the mortgage payment and lessen the burden of owning two houses.

Calculate how much you can afford to risk waiting for prices to go up. For example, if you rent out the first house, and continue to make the mortgage payments, you might lose $400 a month. In 2 years, you would have lost $9600. But in two years, the house may sell for $15,000 more than it would sell today. This gives you a net gain, and a good reason to avoid going into foreclosure.

It's not likely that foreclosure on your first house will affect the mortgage of your second house in another city. However, foreclosure will have a dramatic effect on your credit and finances for at least 7 years into the future, regardless of where you live.

If you can not see any way to keep both houses, talk to your bank before defaulting or missing any mortgage payments. Banks usually try to avoid foreclosure also. They can do much more for you before you are behind on your payments, than after you are in default. Most banks will work with you to lower your interest rate, or put you into a more favorable loan, with an easier payment schedule, rather than have you go into foreclosure.

Answer 2

They can't foreclose on the second property unless it is connected in some way to the first mortgage. However, the foreclosure of the first property can cause the lender to call the second loan for fear that you might default on it.

Written into every loan agreement are terms that allow the lender to call the loan for almost any reason they want.

If they house were in a very good neighborhood, you probably wouldn't want to rent the property. If it is a typical middle class home, renting is an option. The real estate agent can manage the property for you, but usually they want you to choose the tenant so that they have no liability in the matter.

You can also do a lease option. Often, you charge more than the loan payment, plus taxes and insurance if they are not part of the loan payment. That extra amount goes to the purchaser's down payment.

You would want to tailor this so that at the end of their lease option agreement, they have enough for a down payment. Often this period is 1 to 3 years. In that time, the value of the property may have increased, so the value of the property will exceed the loan amount enough to process the loan.

Usually real estate agents won't get involved with lease option agreements.

Good Luck.

Answer 3

It appears that you're getting solid advice in response to your question. Our thought is that it's better to sell your kidneys than to let a property go into foreclosure! Aside from the BIG hit on your credit, the house you're buying may be the last you can buy for up to 10 years unless you pay all cash. Lenders see foreclosures as a big, red X and it's possibly the worst thing you can do to your credit, short of a personal bankruptcy. If your asking price is what you owe and your house isn't selling, consider a Lease Option and market the house to someone who for legitimate reasons can't qualify for a home loan. Job loss and re-employment, medical bills and other "Legitimate" events can lower a person's credit score, but it doesn't mean they're a poor risk. Contact a few mortgage lenders in the area, or have your agent do so. Ask the lenders to contact applicants who may meet the criteria to buy your house if the "Event" had not happened. I bet you will sell it quickly this way for more than you're currently asking, giving you a profit on the home, and allowing someone who wants to own a home to get into one.

Answer 4

First of all, you should refer your questions to an attorney, not a Real Estate or Mortgage Broker.

Here are some definitions that will hopefully help you to clarify your situation and your commitments:

1. A MORTGAGE is a pledge of your property as collateral for the bank loan. Because of this promise your lender has the right to possession of your property after default.

2. In the period between DEFAULT and FORECLOSURE, you have the right to redeem your property by paying your debt. So, you would not be choosing to foreclose, you would choose to default. Default results in foreclosure- a public auction of your property. If you are worried about privacy, you should know that it will a PUBLIC procedure.

In my opinion, the temporary strain of two house payments will be less painful than recovering your credit rating after a foreclosure. It is not an "easy out"; it is a legal procedure against you.

I'd urge you to think of it this way ... if you do not get what you owe for your property, it's more like paying rent than building equity. It's not a happy thought as a homeowner, but it's also not the end of the world.

Best of luck to you.

Answer 5

There is a section on the Uniform Residential Loan Application you will fill out to secure another loan for your future mortgage. It asks you if you have ever lost a home to foreclosure. By posting your question, you are publicly contemplating a fairly reckless course of action that should be avoided. Furthermore, mortgage fraud is on the rise and it carries a pretty stiff penalty. I hope you are able to find a better solution that the one you are proposing. Best of luck.

Answer 6

I don't think thats a good idea. maybe you should buy your other house in someone else's name.