I want to backtrack here for a minute because I think SMH’s situation may not have been that “dire.” I will use a “June 2003” buying month for illustrative purposes only. That “era” was nowhere near the height of the RE “bubble.”
[quote=SellingMyHome] . . . There was no reason to leave that house except it was no longer the house we wanted, and felt a bit screwed that it wasn’t worth the money we owed (even from the purchase price). . .
I had hoped for modest price increases, enough to move-up in about 10 years. I never thought, nor still do, that housing should be a money maker . . .
I do prefer those that at least try to pretend they aren’t judging me without knowing my whole story.[/quote]
SMH, my post was not designed to “know your whole story” or “judge you” (hence, I didn’t ask for any information regarding specific amounts of “cash out” taken).
It was to get into the mind of a “strategic defaulter.” Believe it or not, there have been thousands of NOD’s filed in this county in the last three years in which the defaulted amounts and late fees/charges still continue to grow month by month AND in which the defaulted-upon lender has never filed an NOS on. Presumably, the defaulting trustor (or their “paying” tenant”) still resides in these properties. In a few of these cases, I am personally aware that the defaulting trustor still lives in the property and has always been gainfully employed. In other words, nothing has changed in their circumstances to warrant stopping payment on their mortgages except that they felt they were “underwater,” saw others (with obviously better credit than they) recently buy “bigger, `better’ houses for less $$ or consciously decided they would try to ride the “free” foreclosure gravy train as long as possible (until after their property changed hands or reverted to the beneficiary at the time of trustee’s sale).
Of course, we all understand here that nothing is “free.” You pay for these decisions with a big hit to your credit report. And SMH DID. If his credit is currently in the “low 700’s,” he has not yet recovered enough to obtain a “prime” conventional loan.
SMH, let’s just suppose you never refied and just kept the property for ten years, as you intended. You stated you planned on having kids in five years, so you DID plan on starting a family while living there. Ten years from 2003 is 2013. Who’s to say our local market wouldn’t recover significantly by 2013 or 2014? A LOT of things can happen in the next year and I think it’s going to be a wild ride :=]
$400K purchase price in 2003 (assuming credit score =>740 at the time and $0 downpayment):
$320K conv first TD at approx 5.75% fixed for 30 yrs (or 30 due in 7) = $1868.80 mo P & I.
$80K purchase-money private 2nd TD (yes, even if also serviced by a “legit” lender, it was immediately shlepped off on some poor chump at a discount) at approx 7.5% 30 yr fixed due in 10 years (balloon) = $559.20 mo P&I.
$1868.80 1st TD P&I
$ 559.20 2nd TD P&I
$2428.00 Total P&I
$ 54.50 of $654 homeowner policy annual premium
$ 390.00 1st yr monthly property tax ($4680 yr)
$2872.50 Total PITI (1st yr of ownership)
Let’s look at the amortization on the 1st TD:
Amortization table for $320,000.00 (1st pymt 8/1/03)
As I stated above, I used the purchase month as June 2003 for illustrative purposes only.
$277,803.02 (11/11 balance on 1st TD)
$ 71,896.64 (11/11 balance on 2nd TD)
$349,699.66 (payoff amt of 1st & 2nd TD combined)
However, if you had good credit during the period of your “homeownership,” you could have easily refied these two loans (with zero “cash out”) down to a new 15 or 30 year fixed rate loan with 0 pts and low closing costs and reduced your P&I payments up to $1000 per mo enabling you to keep the property indefinitely at a low cost and even turn it into a rental. In 2004 and 2009, mortgage rates were VERY low (for those with good credit) as they are now.
You stated that your house appraised in a 2006 refi for $600K? Why didn’t you sell then (instead of refi) if you wanted out?
Most of the students enrolled in public schools in Lakeside seem to be doing fine:
Name of School/ 2011 API score
Riverview Elem: 853
Lakeside Farms Elem: 834
Lakeview Elem: 825
Lemon Crest Elem: 820
Lindo Park Elem: 776
Winter Gardens: 699
Tierra Del Sol Middle: 763
El Capitan HS: 738
And GOOD LUCK with your purchase of a (more expensive) purchase in Alpine using FHA. A $500K FHA purchase with 3.5% down has a $17,500 downpayment + the (now exorbitant) MMI paid both up front ($8750) and for the life of the loan ($221.14 mo).
A homeowner’s policy can be very expensive out there, as well. IMO, you should endeavor to save at least $120K while you are still renting (for a downpayment and closing costs on a $500K purchase) and go “conventional” (when you are finally able to obtain a competitive interest rate).
Alpine does not yet have its own HS (under construction to open 2013 or 2014). Guess where Alpine HS students have been bussed to all these years . . . you guessed it . . . primarily El Capitan (Lakeside) and Granite Hills High!
There is no “appreciable difference” in the performance of students taking standardized tests at *most* of the Lakeside elem/middle schools v. the Alpine schools.
What I’m trying to illustrate here is that even though you may have not yet been able to yet sell your Lakeside property for enough to pay a RE brokerage fee and closing costs, had you just stayed in the property and NOT withdrawn cash (but possibly refied the 1st & 2nd PM TD’s to 1 mtg with a much lower interest rate), you could very well have been better off today. Taxes have been going down since 2007 (adj voluntarily downwards by the assessor in 2009 and 2010).
I believe the possibility existed for you to eventually sell your Lakeside property at break-even or even a small gain by 2013-2014, so you may have screwed up your credit for nothing. Of course, your credit MAY recover enough to obtain a prime mtg by 2013-2014, but you lost the MID for all the years in the interim. Not sure how valuable that is/was to you.
As large lots go, the grass is not always greener on the other side, “figuratively” or otherwise (“windy, fire prone, hillier” Alpine v. “more sheltered, level-lot, better-located” Lakeside.
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SMH, I wish you the best of luck in purchasing with the FHA program in a $400K to $500K price range. Given the recent new regulations, guidelines and *exorbitant* MMI now, I don’t think it’s a very prudent way to buy a property anymore, ESPECIALLY one with a mortgage >$300K.
Just ask yourself how you’re going to be able to successfully jump thru all the hoops you will need to get your FHA lender to eliminate your (approx) $214 mo MMI in the coming years. That and your exorbitant fire ins coverage are going to get old real fast, IMHO. And this all pre-supposes you WILL NOT move into CFD/HOA out there and incur those monthly expenses as well :={
