Real Estate Q&A
We purchased our home in 2008, at the peak of the housing market, and have been making our payments each month, but we are nearing the end of our financial rope.
We purchased for $223,000 and we still owe $181,000, but over the past two years we have been both been in and out of work and are both currently out of work and have used all our savings to make the payments on our home.
We desperately do not want to have our home foreclosed on, but now realize that there is little blood left in the turnip and we must make a decision within the next 60 days of whether to stay or let it go.
We were able to refinance the home about 8 months ago, which helped lower our monthly payment and that has helped, but the lack of meaningful employment is forcing our hand. If you have any advice, it would be appreciated, because we do not want to be those parents who have to move in with their children to survive. Any help would be appreciated.
Names Withheld, Grand Junction
Unfortunately this is a scenario I have run across fairly often over the past several years as employment opportunities have dwindled, yet the world keeps moving.
I would first say, don’t be ashamed of being “those parents” who have to move in with family to survive. The most difficult times are those times when we can come together as a family and grow stronger and overcome our hardships and come out on the other side not only stronger people individually, but also as a family unit. If it comes to that, try seeing it as an opportunity to get your feet under you again and come through this difficult time stronger than before. Remember, your family is likely not to see it as a burden, but an opportunity happily lend a hand!
It sounds as though you have been diligent in making your payments and thus potentially preserving your credit, assuming you have been able to make all your other payments on a timely basis. My first suggestion would have been to contact the lender who holds your loan and see about a loan modification or refinance, but you have already covered that one as well.
The next thing would be to investigate renting your home out. By renting your home you may still have to move in with family, but will likely find a good renter who will cover the mortgage for you until you get on your feet again.
If you owe $181,000 then your mortgage, taxes and insurance should not be much more, or potentially less, than $1000 per month. (Assuming an interest rate of 4.5 percent) Depending on where you live, size and condition of home etc., you may well be able to rent it and get the entire mortgage covered by the renter, which will give you some time to find new jobs and save up some money and get your financial house in order.
Renting can be a very good option for situations just like yours, it will cover the mortgage and buy you the time you need to find your way again.
There are several considerable risks in renting any house out, but one area of concern is: what happens if you do not get it rented in a timely fashion or your renter moves out in the middle of the night or stops making payments? There are many land mines to navigate when renting and being prepared for those potential problems is a large part of the battle.
If this sounds like a reasonable option, then I would recommend discussing your options with a property manager and seeing how quickly you can get your home onto the rental market.
This is not the “only answer”, but appears like it might be the most reasonable option given your time lines and situation. A property manager will be able to provide you a target rent rate, provide statistics on vacancy rates and also help you identify potential renters and screen them for you. Screening your potential renter is the most important part of the process, because your experience will generally be dependent on how good the screening process is.
This is a difficult situation, but finding a renter and spending a year with family may be just what is needed to keep you in your home long term and allow you to financially recover. I hope this helps, best of luck.
The Kimbrough Team,
RE/MAX 4000, Inc