I need your help!
Alright everyone, I have a scenario that I want to run by you and I am hoping for some advice. First, I will give you a back story, then I will ask what you would do. I appreciate any advice that you have to give.
My wife and I bought our home close to 7 years ago when the house market was at it’s peak (of course). We bought a home that we could easily afford, so we didn’t have any issues during the recession. That was not the case for most of our neighbors. At one point, about 40% of our neighborhood was going through foreclosure. I had to drive through “foreclosure row” just to get home. It was sad, but just showed the issues that the housing market had.
As first time home buyers, we wish we would have vetted the neighborhood a little better, but we can’t take it back now. This is not a place where we want to raise our son. The school district is not good and the children are generally disrespectful to each other and to adults. I don’t even want my son to have friends like the ones around here. We want to move to a better neighborhood that is closer to work, friends, and family. We don’t have to go far, only about 30 minutes away, so that is good news.
We wanted to sell our home last year, but our mortgage was so close to what we could sell that we would end up losing money (no good). That scenario has changed in just a year and now we can sell the house and pay the Realtor without losing money. We won’t make much, but a positive return is a good step.
Alright, here is what is keeping us back from just starting to selling process. Our neighbor’s house just sold in a foreclosure auction for $40,000 less than what we want to sell our home for. This is really putting a damper on our plans. Also, we were planning on selling the house next year because then we would have the 20% down to avoid PMI (private mortgage insurance).
I have been watching the news lately and how mortgage rates are rising. This is starting to scare me. If I continue to wait, then it could end up costing us a lot of money over the life of the loan. The problem is that we now don’t have the necessary 20% down. I know there are programs out there that we can get a mortgage without the 20%, but they are harder to come by and come with some fees.
My Potential Plan
Here is what I am currently thinking of doing and I would love some feedback on it. I am thinking about getting the house ready to put on the market along with start the mortgage approval process. We have good income, low Debt-to-Income, and great credit scores (thanks to Credit Sesame). The only thing we don’t have is 20% down for our next house. I don’t know how long it would take to sell our current home, but I can absorb the costs for a few months.
If we sell our current house first, then we have the ability to move in with our parents for a short time frame. While not ideal, it does provide me with a backup plan. Since we don’t have the 20% down payment, then we would end up having PMI. Most PMI is setup to fall off after 20% of the house is paid off. I think that I can save money by getting a mortgage with PMI and then just paying down the account. If I wait for another year, then interest rates could rise and end up costing me thousands. I just don’t know if this is a good idea.
What Would You Do?
Alright everyone, I need to know what you would do in this situation. I am hoping that some of you have some great advice or something that you have done. I know I can’t be the only one that is in this situation. Where should I start? Any feedback or advice is greatly appreciated. Thanks everyone!
**UPDATE: I forgot to mention that renting my current home is not an option. One, the clientele in their area are usually not good tenants. This would leave me with trouble not only renting the house, but having to deal with bad tenants. The second issue is that I cannot even rent out my house. Our HOA has put a cap on the homes that can rent due to what the neighborhood will be classified as if we go over the cap. Since my house was one of the last to be built in the neighborhood, we were told that we couldn’t rent our house.
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