When you can't afford your home

[XtraRevsSurely]

My mom's mortgage payment is $1787 and she lives on $2635/month. The rest of her $848 goes to her other expenses. She's 66, retired, lives alone, and is looking for work. She owns $160k on a home that's valued around $115k max. She bought the home in 2004 on a 30 yr fixed mortage and is trying to refi. Not sure what her current rate is. She current on payments.
She has too much home and can't afford it long or short term.
What are her options? Short sale, forclosure, try to sell and owe the balance...
She's a big smoker so her home (condo) reeks so that would be turn off. She quiting smokes.
Clearly, keeping paying and try to make it work is best but I honestly don't feel she'll be able to keep up for more than 3 months. Please advise some ideas?

 

[Bill in Utah]

WAY too much payment for her "income" (when she had a job and esp for a Condo which prob has HOA fees plus..)

Short sales will have her owing the IRS some $$ I've seen. Talk to her lender and see what they can do.

She got a 30 YEAR loan when she was in her mid-late 50s?

I'd say she will end up with a foreclosure. Another person with great results in our outstanding economy....

Bill

 

[Drew99GT]

Is her 2635 a month some kind of a defined benefit annuity/pension?

 

[XtraRevsSurely]

Her income is from retirement pension social security. Sadly, when she bought the home she didn't plan for future, just what she could pay while working.

 

[zzyzzx]

She needs to sell the house and move into someplace that she can actually afford. The sooner, the better.

 

[The Critic]

In short-term, she should find a way to rent out some rooms. However, selling it is likely the long-term solution.

 

[Stanley Rockafeller]

Originally Posted By: zzyzzx
She needs to sell the house and move into someplace that she can actually afford. The sooner, the better.


+1

 

[JTK]

Originally Posted By: zzyzzx
She needs to sell the house and move into someplace that she can actually afford. The sooner, the better.


A lot easier said than done given her ~$160K+ home is only worth $115K. She can't afford to sell it at such a loss.

I'm surprised this is the case in WI? I thought home sales were very stable there.

 

[Drew99GT]

Originally Posted By: XtraRevsSurely
Her income is from retirement pension social security. Sadly, when she bought the home she didn't plan for future, just what she could pay while working.


So she will have 2600+ per month guaranteed? What are rent prices like in your area? If she was somehow making the current math work, would half her mortgage payment for rent get a safe apartment?

 

[Drew99GT]

Originally Posted By: JTK
Originally Posted By: zzyzzx
She needs to sell the house and move into someplace that she can actually afford. The sooner, the better.


A lot easier said than done given her ~$160K+ home is only worth $115K. She can't afford to sell it at such a loss.

I'm surprised this is the case in WI? I thought home sales were very stable there.


It can be done in a negotiated short sale. It will mean her credit is likely wiped out for life, but if she can't afford it, she can't afford it.

 

[Dave Hess]

She should sell it and rent an efficiency.

It’s very sad that she is in this situation.

 

[JHZR2]

Why would a 58 year old buy a home on a 30 year loan? Especially one that smokes? Sorry, but the odds arent in anyone's favor, Im surprised they would even have allowed that loan.

ESPECIALLY if income was slated to only be $2600. Even if she quits smoking and frees up $250/moth, she can't swing it.

You're going to have to bring mom into your house and plan on her being there for 7 years or more. Unfortunately, given her smoking, Id count on it being permanent. Unless you want to pay for it, or at least pay to the point where she has 20% equity, she is going to have to walk from it, kill her credit, and be in big trouble.

IMO youre best off using her $2600 to cover an expansion on your home and let her stay there. She probably could get a decent apartment, if her credit does not keep her out of the nicer communities, but given her age and likely health issues in the next few years, that may not be the best bet.

 

[XtraRevsSurely]

Originally Posted By: JTK

I'm surprised this is the case in WI? I thought home sales were very stable there.


My mom lives in IL..NW Suburbs. Plus it's a Condo. I factored in her Association fees with her mortgage.
When she got the mortgage she was a tenured teacher making good money. She made $60k+ year then. That money is gone due to bad spending habbits. The $2600+/month now is fixed.

 

[XtraRevsSurely]

Originally Posted By: Drew99GT

What are rent prices like in your area? If she was somehow making the current math work, would half her mortgage payment for rent get a safe apartment?

If she can get out from her mortgage she can find a safe apartment. There are senior apartment around $1,000/month in her area. My wife's been looking at options in that direction.

 

[genynnc]

Originally Posted By: Drew99GT


It can be done in a negotiated short sale. It will mean her credit is likely wiped out for life, but if she can't afford it, she can't afford it.


The short-sale is a good choice depending on how many mortgages are present on title. If there are multiple, then the chance of that happening are drastically reduced. If there are multiple mortgages and they are with different lenders, the chances for a short-sale are slim-to-none.

However, if a short-sale is possible, it is WAY, WAY better for a person's credit than foreclosure. This is because the debt is/ will be satisfied because of the agreed loss/ write down on the banks side. A person will just have some rolling lates in the 30, 60, 90, 120 days.


I would advise these steps...

Look into H.A.M.P. 2.0 from the current mortgage servicer/ lender (gov't refi program).

What is the "hardship" (Banking term)? Plain language- What has changed in her life to reduce/ disrupt her income to cause the current need to walk away or reduce affordability? I assume retirement? If so, this may reduce the chance for qualifying for a H.A.M.P loan.

How in the world did she qualify for the original loan? She must have made quite a bit more money than her fixed income is now. Right now, the mortgage consumes 67% of her net income. Is the $1787 just principal and interest or does that include taxes and insurances as well?

Even when I was working in sub-prime mortgages, we NEVER would approve a loan where the principal and interest consumed over 25% of the persons gross income. PERIOD.

If she has her original documents/pkg from the closing, look back at the 1003 (loan application) and see what they have written down for income(should be the 2nd page). Double check this because if it's not accurate (could be overstated to get her to qualify) then there could be fraud.

Also, if you can, let us know when the original loan was closed, how many mortgages, if she has opened up a home equity line of credit, or refinanced and the dates of these transactions if they exist. If this is a privacy issue, then no worries, don't relay the info.

Best of luck.

 

[genynnc]

Originally Posted By: XtraRevsSurely


My mom lives in IL..NW Suburbs. Plus it's a Condo. I factored in her Association fees with her mortgage.
When she got the mortgage she was a tenured teacher making good money. She made $60k+ year then. That money is gone due to bad spending habbits. The $2600+/month now is fixed.


Ok, so the association fees must be in the $200-250 range?

Being it a condo, it's gonna make the H.A.M.P program even tougher. (I keep mentioning H.A.M.P because that is the only way- loan wise- to get a principal reduction, reduced payment, reduced rate, etc... without a short-sale/ foreclosure)

Something is still missing... even with $60K a year income, she wouldn't qualify for the mortgage, if it was conforming. Non-conforming, it would still be pretty hard... just depends on her credit quality and loan programs at the time of closing.

Was there two incomes when the original loan was closed? (Two borrowers).

 

[thomasflaherty]

Are we missing some thing here $1787 how much did she borrow in 2004 at what rate and what are the taxs??? alot of numbers left out of the story

 

[rshaw125]

Refinance it with her. Get a 15 super low interest rate. Take in a professional person as a boarder.

(Has this mortgage been previously refinanced with cash out?)

That way your Mom has her own place and her credit is preserved.

 

[mechtech2]

Lots of bad thinking led up to this.
Now, she has to dump it and live accordingly.

 

[Bill in Utah]

Originally Posted By: XtraRevsSurely
Originally Posted By: JTK

I'm surprised this is the case in WI? I thought home sales were very stable there.


My mom lives in IL..NW Suburbs. Plus it's a Condo. I factored in her Association fees with her mortgage.
When she got the mortgage she was a tenured teacher making good money. She made $60k+ year then. That money is gone due to bad spending habbits. The $2600+/month now is fixed.


Sorry to hear about her situation. But being late 50's and that much of a payment plus the condo fee she took WAY TOO MUCH of a loan for $60k income. Then we add in the fact that the loan was a 30 year one and OUCH.. Hopefully some others can LEARN from her!

The home prices going down are going to be the norm and personally I'm okay with home prices staying the same over the years.

I hope I can sell mine for the same I bought it for when I need to sell it. Right now its well above but I want the next generation to be able to afford a home. This mindset that you buy your home and 10,20-30 years later selling for 2-3 or more times is just screwing our kids / grandkids IMO.

Bill