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I'm currently considering taking a job in another state, and I currently own a home that's up-side down in it's mortgage. I'm trying to figure out what I would do with my home in the event that I move. Here's a few stats, at least approximate values.

  • Current home value: $180K
  • Current home mortgage: $230K (FHA loan)
  • Current monthly payments: $1700 (Includes insurance, property tax)
  • Price of similar houses for rent: $1200ish

I'm hoping with the new job that I might get, I would be earning about $10K more, when adjusting for the cost of living is taken into account.

So, among the options I'm considering are:

  1. Short Sell current house, rent in new location
  2. Short Sell current house, try to buy in new location
  3. Try to rent out current house, rent in new location
  4. Try to rent out current house, buy in new location

Which one of these options would make the most sense, or is there another one that I'm not thinking of? Thanks!

  • What would it cost to rent/buy a similar place in the new location? – Stainsor May 19 '11 at 16:34
  • @Stainsor: Homes are around $500-$600K, renting around $2100 a month, ballpark figures. I haven't done a lot of research in the area yet, so... – PearsonArtPhoto May 19 '11 at 19:05
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    Sounds like a 10K raise isn't enough of a bump to work where houses are half a million..... – Ash Machine May 19 '11 at 21:04
  • @AshMachine: The bump would be more than just $10K, it's more like a 33% bump plus 10K, or something like that... – PearsonArtPhoto May 19 '11 at 22:10
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A short sale will be pretty bad for your credit report. It will linger for 7 years. This may ruin your opportunity to buy in the new area. On the other hand you need to run the numbers, the last I looked into this, the bank will look at rent and discount it by 25%. So the shortfall of $800/mo (after adjustment) will reduce your borrowing power if you rent it out. In general this is the idea. You rent for a year, and buy into the new area. If you short sell after this, while your credit is trashed, you still have your new home, and $50K less debt.

(Disclaimer - There are those who question the ethics of this, a willing short sale. I am offering a purely business answer and making no judgment either way. I owed $90K on a condo where others were selling for $20K. I paid until it came up enough that a lump sum got me out upon sale. The bank got its money in full)

An article on the differences between foreclosure and short sale.

  • I don't like the idea of short selling either really, so... But, sometimes you have to do what you have to do... – PearsonArtPhoto May 19 '11 at 20:57
  • i thought the whole advantage of short selling is that it doesn't hurt your credit history unlike foreclosure. – Vitalik May 20 '11 at 0:38
  • @Vitalik Read the link. It doesn't drop your credit score as much as a foreclosure would. – Peter K. May 20 '11 at 2:24
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There is another option. Stay where you are.

  • And I think this is the best option. I wouldn't move a great distance for a 10K raise. Depending on how much stuff you have, the cost of the move itself might actually set you back over 10k the first year, cancelling out the reason for moving. Of course I'll withhold room for reasonable exceptions: 1) Moving to another country where you felt lucky to find an employer to sponsor you, 2) Concern that your current company is faltering, 3) An opportunity to move to a more prolific market, 4) ..sheer hatred of your current job, etc. – elrobis Dec 19 '14 at 17:46
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    This doesn't offer op's question and would be better suited as a comment. – Madbreaks Apr 13 '17 at 16:05

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