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I Made Such a Mistake Buying My 774 Square Foot House in Chicago. – Carmen


“Hi Steve,

I am desperate and would appreciate any insight that you can provide. I bought a house for $188,000 on the south west side of Chicago in June 2007. My mortgage is now upside down and houses on my block are selling for half of what I paid 2 years ago. My monthly note, including PMI because I paid no money down, amount to just under $1600.00. It would be easier to make my monthly payment, which I can afford because my husband and I are both employed, if this was at least the home that I wanted. But it’s not.

This is the house I settled for because it was what I could afford. It is very small, about 774 sq feet, and in need of several repairs. I have already bought new windows, new furnace, central air conditioner and rebuilt the porch since we have been here. I do not want to invest anymore money into this house, which still needs repairs, because I do not think I would ever make it back.

My sisters tell me that I should hang on till the market rebounds, but what if I still can not recoup what I have invested. Besides that, at $1600.00 a month, how can I ever save a down payment for another home. The bank, Wells Fargo, is not willing to help me because I am not behind on my payments. I am a law abiding citizen and if you could check my credit, you would see that I pay people when I owe them, but I really want to walk away from this house. I feel so sad and frustrated because I should have just stayed in an apartment and saved a down payment. I was so ignorant. I just thought that you didn’t need a down payment and that you could buy a house without it. Now I look back and see what a bad decision I made. I promise you that I understand the bad choices I made and would never attempt to buy another home without a 20% down payment. Any advice that you could provide would not be wasted on me. I just do not want to suffer for the next 28 years for my mistake.

If I voluntarily foreclose on my home, can they come after my husband whose name is not on the loan papers but was added to the title deed? Will my husband’s credit be affected by my foreclosure? Can he still purchase a home if I foreclose? Will lenders be checking into my credit if he wants to purchase a home? Are there any other options for my situation that you could offer?

Thanks Steve.


Dear Carmen,

There are a number of issues here to deal with. While the house will eventually rebound in value I doubt it will be anytime soon. And even when it does you’ll have to factor in the cost of inflation that has occurred in the meantime. By the time the house bounces back you’d probably need a valuation of $225,000 to get to the value of your investment dollars.

I certainly understand what your sisters are saying but I think you need to evaluate what your ongoing costs would be to maintain the house during the time it would take the home to rebound. Those investments will just repair, rather than expand the home.

Since your husband is not on the mortgage, any action you take will not be reported on the credit report. However, if he is asked if he has ever had a home voluntarily handed back, the answer would be yes. That is not a credit report question but it might be a future mortgage application question which would require an explanation.

Simply based upon your situation and what you’ve shared, it seems like handing the house back and then maybe a bankruptcy to clear the resulting debt would be a way to go. Here is why.

It sounds like you have embarked down a path that you now regret and unless you face handing the keys back and bankruptcy, there is no exit strategy for you from this situation for at least the next decade. If the real estate market had not collapsed you would have been able to sell the house to another starter couple and moved on with your plan. But that’s not what did happen to the real estate market. You bought, the market dropped, you’re stuck.

If you hand the house back and go bankrupt it will allow you to get a fresh start and a second chance. Hopefully the difference in rents and your mortgage payment will allow you to save for a future house.

You’re credit can be rebuilt and you can qualify to purchase a house again in the future. I’m not worried about that.

That most unfortunate part is the money you have already invested in upgrading the house which you will not get back. The only way to get that back would be to stay and that does not sound like the way to go.

I would suggest that before you do anything that you meet with a local bankruptcy attorney and discuss the situation to coordinate a game plan and timing on how to make this happen.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

1 Comment

  • Hi Carmen,

    It’s true that Wells Fargo will not modify your loan if you remain current, and falling behind on payments will surely hurt your credit. As screwy as that sounds, that is the policy.

    You may want to contact Wells Fargo and ask about a deed-in-lieu of foreclosure. This is the official name for “handing over the keys” to a property.

    Before they agree to a deed in lieu they will probably want to see that the property has been actively listed for sale, for a certain period of time, usually 90 days. Before they agree to take the keys back, they will want to see that you tried to sell or find them a buyer for short sale (selling for less than is owed). The sooner you start, the sooner you will have fulfilled that requirement, so you can begin by lining up a realtor.

    Be sure to check with Wells Fargo before listing the property with a realtor, or better yet, have your realtor do it for you. Just to make sure you’re meeting their requirements. Try to find a realtor that has experience in short sales and dealing with mortgage companies, they can prove invaluable.

    It may seem like your completely in over your head, but I’m sure it will be over before long. Do your best to keep your bills paid on time and you just may find yourself in a much better place, a lot sooner than you think.

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