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Forum > Miscellaneous > real estate question ( Moderated by Deepika, EleanorSews, CynthiaSue)

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real estate question
ShantiSeamstressing
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ShantiSeamstressing
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Date: 3/27/13 6:37 PM

I'm sure this is a pretty dumb question, but I not very well-versed in real estate matters...yet...

If due to the economy and how it's affected housing prices, the price we paid for our house in 2006 is probably not as much as it's currently worth, is there any way to get our mortgage changed to reflect that? Meaning, hypothetically, were we to put this house on the market today, we couldn't price it for what we paid for it in '06. So, I just wondered if it was "fair" therefore for the bank to change our mortgage to reflect that. (Then again, they probably don't want to do things like that....)

EleanorSews
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Date: 3/27/13 6:48 PM

If you mean is it possible to get the bank to change the amount of your mortgage loan, the answer is no. The logic is that you borrowed a certain amount of money to purchase the house. The bank agreed to lend that amount of money and it is appropriate for the bank to expect repayment. What happens is that the value of the house is collateral for your loan. The bank has less collateral to back up that loan now.

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"We don't see things as they are, we see them as we are." Anais Nin

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tlmck3
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tlmck3
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In reply to ShantiSeamstressing <<


Date: 3/27/13 7:31 PM

If you live in the US, there is a Federal program that will help with loan modifications, including principle adjustments and interest rate adjustments but I understand the program has been little used because the qualifications are very specific and the application process is onerous.


Making Home Affordable program

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I am going for a level of perfection that is only mine... Most of the pleasure is in getting that last little piece perfect...Inspiration is for amateurs. The rest of us just keep showing up and doing the work.

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ShantiSeamstressing
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ShantiSeamstressing
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In reply to EleanorSews <<


Date: 3/27/13 7:33 PM

Thank you Eleanor! The way you explained that makes it understandable. It's a pain to be paying "more" than it is worth, but thankfully we are able to. So that's not a problem. But we are looking into moving in a year or so possibly, and while I don't know what the housing market will be like then, if it's anything as it is now, how would we sell this house asking for it what we ourselves bought it for, when it isn't worth the same amount now? It's all well and good us continuing to pay this amount, as that is our mortgage made at the time; but no one else would willingly (foolishly) buy an over-priced house. (Am I over-thinking this? Or missing something obvious? I guess it's quite clear I didn't study accounting or business in college...)

ShantiSeamstressing
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In reply to tlmck3 <<


Date: 3/27/13 7:35 PM

Thanks tlmck3! I'm pretty sure we don't qualify because those are for fannie Mae/Freddie Mac loans, but ours is with a private local credit union.

michellep74
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Date: 3/27/13 7:49 PM

We were underwater on our condo for a few years, but thankfully, the value has now come back enough in our neighborhood that we're planning to list very soon so that we can move into something a bit more baby-friendly.

I had a neighbor who did a loan modification through the federal loan mod program. Once they got her going with it, it wasn't that much worse than a regular re-fi. She DID have to prove financial hardship to qualify. (Between the time that she purchased in 2006 and now, she'd had to take a significant pay cut, so her payments had become a financial burden.)

The other option would be to short-sell. This is where the bank essentially allows you to walk away from your home and loan when the value of the home is less than the loan. You'll also need to prove financial hardship for this, as well--typically through the loss of a job, divorce, etc. A short-sale will ding your credit for a few years and you won't be able to buy another home for a few years (I believe the waiting period has been dropped to 2 years.) Additionally, you may have to pay taxes on the difference in the loan value--there was some pending legislation where that would be counted as income.

I think that the best thing for you to do right now is to get a recommendation for a realtor who specializes in listings and try to get an idea of what your home is worth right now and what they project it to be worth when you might need to move. We were considering a short sale last year, but we talked to a realtor who reassured us that if we stuck it out another year, the value on our place would come back enough for us to do a traditional sale.

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--Michelle

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ShantiSeamstressing
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ShantiSeamstressing
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In reply to michellep74 <<


Date: 3/27/13 8:50 PM

Thanks, Michelle! I definitely don't foresee us doing a short-sale as I don't see us moving anytime soon. We'll see how things look in the next couple years, though.

NancyZL
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In reply to ShantiSeamstressing <<


Date: 3/27/13 9:24 PM

hi, you may want to take a brief personal finance course if you
feel unknowledgeable about such things. It doesn't need to involve accounting or business . There are also many good books out there which can help you. I personally feel most people never take a personal finance class or course & end up
being scammed along the way . Knowledge is power as they say!

Kim12469
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Date: 3/27/13 10:17 PM

I just sold a house last year and we had to list it for less than we paid for it. Bottom line is that if you want/need to sell then you will lose money one way or another. Our house was purchased for $310,000, with downpayment and paying on principle we owed $240,000 after 7 years. We listed the house based on market conditions and got an offer for $269,000 with an additional acre thrown in. Long story short, we managed to walk away from closing with a very small amount of cash in hand, luckily! But, we lost our entire downpayment and any principal we paid over 7 years.

You can list your house for what you paid for it but if the market doesn't support it then you won't get any offers.

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Coconuts
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Date: 3/27/13 11:29 PM

You might want to look into a HARP refi. I think Fannie and Freddie buy loans from CUs as well as banks. It won't lower your mortgage balance, but it may very well lower your interest rate.

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