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Want to buy prop before selling home, bad credit. How?

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Posted Aug 3 2008, 11:01

Hi everyone. I'm not much of an investor, but my current home has appreciated a lot in 5 years so I suppose I qualify. :) I have a couple questions for you guys, but first let me explain my situation...

My wife and I would like to sell our home worth about $265k and we found another house that we really like for a very firm $150k. We're not able to afford our current house payments and would like a larger lot & smaller home. We owe $108k on our home now (FHA 30 mortgage 7.25%) and would like to put $85k or more down on the new property. This would give us a much smaller mortgage bill and make our finances much more workable. We both have pretty bad credit from our current house's foreclosure. It has been reinstated, so it's no longer in foreclosure, but we want to sell it and get into something we can afford. Our income is only about $30k / year and not much of that is documented.

So, here's the main issue: We'd really like to buy the new property and move there before selling our current home. It will be much easier for us and allow us to maximize the selling price by finishing up some cleaning and repairs. The seller is unwilling to do any creative financing to accomplish this and doesn't want to commit to a long contract to allow us to sell our home before closing. We've got $150k+ in equity and it just seems like there should be a way to pull enough of it out to put $85k down on the new house (mortgaging the remaining $65k) before we sell the current one.

I'm guessing this is kind of how it would have to go...
1) refinance home for $210k, leaving ~$95k cash
2) $85k down on new home, finance $65k (9.5%? :crazed:)
3) sell 1st home and pay off the $210k

That would mean about $275k financed until we sold our first home, far beyond what we could make payments on. I guess the big question is: Would any lender give us a loan for the initial refinance, knowing our credit is pretty bad (foreclosure in last 6 months) and our income rather low? Are there any lenders who do such loans for a short-term, knowing we'd sell our house shortly after refinancing (hope that makes sense)? Is an equity loan a possibility?

If closing on the new house before selling our home is not feasible, we'll just offer a 45-day contract and see if we can sell our home by then (assuming she accepts the contract).

I know this is probably a long-winded post and I probably didn't explain everything 100% correctly, but any ideas you might have is greatly appreciated.

Thanks!!

Josh

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