This blog posting comes in response to my request of Ron Aguilar of Utah Home Equity Specialist.
What happens when the home is worth less than the mortgage balance?
If you sell the home it becomes a short sale which prevents you from buying another home for at least 3 years under current underwriting guidelines. Selling the home as a “For Sale by Owner” can be initially beneficial by reducing sales costs. A Mortgage Loan Officer can help you qualify the potential buyers as you attempt to sell the home without a Realtor. It may be worth the cost to get an appraisal of the home to gain the true value which helps the negotiation process with the home buyer. A Home Inspection and Warranty also helps market your home to the buyer for a minimal cost. Many other For Sale by Owner marketing strategies exist to help in this effort.
During a divorce you are greatly consumed with the changes in your life but to maintain your credit is very important. Your credit report contains Mortgage history, Revolving credit, Auto loans and personal loans but the Mortgage history is always on top and the most important. Any negative Mortgage history will affect your credit scores more than other debts.
For the past Seventeen years I have worked closely with divorcing couples trying to make the best decision regarding their home. Today, with decreased home values it may be a good option to rent your home to give the market time to improve rather than selling the home for a loss.