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I Bought a House With 100% Financing And Now Can’t Afford It. – Sandy

“Dear Steve,

Hi- need advice. I am 51 years old. Bought a house in northern Illinois 2 1/2 years ago. 100% financing and I have PMI also. 7.5% rate. 1 1/2 years ago my life changed dramatically. My job was cut back in hours. On top of that I brought my at that time 6 month old grandson into my home to care for- due to circumstances where both parents were not being the parents they should be. I now have full custody of my grandson who is 26 months old. Adoreable little boy.

This has caused a major financial strin for me as on top of the reduced salary ther has been the major expense of a child in the household as well as major attorneys fees(Excess of $15,000) due to the custody battle with the grandchilds parents. I have never been late on a mortgage payment- yet the house is now worth about $10-15,000 less than what I owe on it. Even though I have never missed a mortgage payment- I have borrowed against credit cards to help stay above water. I also have a car payment on a car that is financed for about $8000 more than it is worth. Now have debt in addition to the mortgage in excess of 35,000. Mortgage is 119,000.. I have a credit score currently in the low 700’s. i also recently got married to a wonderful man who has taken on the father role that my grandson needs as well as helping the best he can with finances. He has his own bills to pay so he does what he can. We also plan to move soon from Illinois to MN wher his major employment is. Trying to sell the house but having nor luck at all.

My question- should we continue to pay on the mortgage in hopes the market will turn around? Or would it be adviseable to just stop making payments and letting the home go to forclosure? Are there any other better options such as a short sale or a Deed in Lieu? If I let the house go- will it affect my new hubby at all? His credit score is in the low 800’s. If they forclose will they come after me for any balance owed? and if so will they also try to collect from my husbanor is the debt all mine.? We would like to just move and get on with our lives. I am willing to take the credit score hit with forclosure if I knew we could move on. We would then purchase a lower cost house in MN with only my husband and his good score to get the mortgage.




Dear Sandy,

Well there is some good news in all of this so let me start with that first. I must congratulate you for taking over the role of custodian, and caregiver for your grandson. This is not the first time I’ve run into the same situation and your grandson is a very lucky boy to have such a wonderful grandmother.

Your new husband does not need to worry about credit in your name alone coming back to bite him. This is your debt and he did not get any of it by marrying you.

I think the situation will ultimately determine the best course of action. If the bank is willing to take the deed back in lieu of foreclosure, great. But if not, then that leaves you with either getting permission for you to do a short sale or walking away from the property and letting the bank take it back.

The short sale option really depends on what other comparable homes are selling for in your area. For your house to sell first it is going to have to be attractively priced below those others and the price will also have to be low enough to attract an immediate buyer. Once you know that value from a local real estate agent you can call your bank and explain your situation and that you’d either like to hand the house back or sell it for $X.

In past years the bank would have been more willing to take on the house or agree to a short sale but this is just an unusual time and a tough environment for banks.

You should not hesitate in calling your mortgage company and be 100% honest with them. There is nothing they can do to you that we can’t stop with the last option, bankruptcy.

With bankruptcy you could hand the house back, let the bank foreclose, eliminate your credit card debt and get a fresh start in a new life.

So, best advice, call the bank and talk to a local bankruptcy attorney or two to discuss how you might be able to use bankruptcy as a tool for you to break out of your current situation and take that beloved grandson of yours to a new life in Minnesota.

Let me know in the comments section of this question what you decide to do.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

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About Steve Rhode

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.
  • sandy

    thank you so much for your help. We are going to see what option is best for us. Will let you know how it turns out

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