Buy New Home While Upside Down

If I told someone I was upside down back in the 90’s they would think I was confused, lost or just nutz!  Today, everyone immediately knows that “upside down” means your house is worth less than you owe.  I receive calls on a daily basis from clients wanting to know if the fact that they are upside down on their current home will prohibit them from buying a new home.   They want to take advantage of record low mortgage rates and home prices in the greater Phoenix Area (and across the nation).

The fact that a homeowner is upside down does not at all preclude them from buying a new home.  There are a few things we need to look at to make sure an upside homeowner can qualify to buy another home:

1. Do they qualify for both their current mortgage payment and the new mortgage payment (for the new house)?
2. Do they have a legitimate reason for buying a new primary? (ex: buying closer to work/school, buying a larger home etc…)?
3. Do they plan on renting their current home out or keeping it for any other reason? (if they plan on foreclosing or short selling  immediately this would not be looked at favorably)?

If the answer is “YES” to these questions than it is business as usual regarding loan approval.  Many homeowners are turning their current/upside down homes into rentals which allows them to move on and buy house.  Lets face it, more people would be moving as their lives progress if it wasn’t for the decline in the market.  There is a way to still move on!

By Jeremy House

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