Mortgage experts: need some help
 

One of my best friends is in a huge bind down in Northern VA.

He purchased a condo 4 years ago on an interest only loan. At the time, things were booming down here. He knew he wouldn't live in VA forever, so he took that loan thinking he could make some coin when he left.

He miscalculated.

His wife just had a baby in April and they are dying to move down to North Carolina to be with family.

Problem is, he has few options with the condo. He would owe 80 grand at closing right now due to the nosedive the place took.

Does he have any real options that won't ruin his credit? He can pay the mortgage every month, but he just wants to get out of here.

(and no, this "friend" isn't me. I was smart enough to stay away from the real estate market down here and just rented).

Thanks in advance for any help. He's pulling his hair out trying to come up with something.

If he short sells his home he will ruin his credit, but maybe he can rent the place out until the market value possibly goes up enough to where he can break even on the condo.

Tell him to find someone familiar with the new FHA program, and the new regulations from the housing bailout bill. Especially the part about wiping out the difference between what you owe and what your place is worth.

New FHA program. Wipe out part you owe above what it's worth for no penalty to your credit.

Thanks SBK.

I just talked to him. He looked into that program. But he said that it's for people who can't afford their mortgage because of rising costs.

His problem is he can pay all his bills and doesn't struggle enough that he can't afford his place to get gov. assistance.

He just wants to be able to sell his condo without taking such a monsterous hit.

Then tell him he picked a bad time to buy and he's screwed.

I did.

He didn't listen to me when I told him renting was the way to go if we weren't planning on living down here for a long time.

I would just recommend that he tries to rent it out.

Really? So a person can sell their house for 30K less, not pay off the debt and their credit wouldn't be screwed? Can that be done for conventional loans too?

I do short sales in Jax, FL. Good news is, he can live rent free for at least 12 months while the lender forecloses. Tell him to save $, buy a home BEFORE they file FC proceedings, and then walk away...

I'm sure there is a lesson in this story...

I think that's the route he's going to take.

Only problem is he wants to move far out of the area so I don't know how he'd manage it.

It'll cut into the amount he's getting out of it, but there are often local rental management companies that will manage the whole deal, provide maintenance services, etc. for a fee.

Is this possible? Seriously, I don't have a clue how forclosings work.

Sure is.

Never buy real estate on an interest only loan.

For the short sale, how can he live rent free?