Tenant Choice

31 Replies

This is a hypothetical question based on a decision I will likely need to make.  If you had to chose and approve one of these tenants, which one would it be?

Assume both renters have the same amount of income, assets, liabilities, and same credit score. The renters incomes cannot be garnished,

Renter 1. 100k mortgage with 1k monthly payment includes taxes and insurance,     Stopped paying mortgage for a year and is in forclosure. 100k credit cards pays 1k per month on time.  Pays all non housing bills on time   

Renter 2. 100k mortgage with 1k monthly pmt, which he pays in full on time, 100k credit cards with 1k monthly payment, stopped paying credit cards several months ago. Assume credit card balance is growing only at same rate as mortgage in default on renter 1.  Pays mortgage and all other non credit card bills.  

In sum, assuming all else is equal.  If you had to end to one of them would you rather rent to someone who defaults on their mortgage with forclosure or defaults on their credit cards.  Thx. 

Option C.  Someone that doesn't have $200k in debt!

I did not disclose the income or house value    Please pick one.    I may soon have to decide weather I pay my  mortgage or credit cards. 

Ok ok, I figured as much. The credit cards are much more likely to sue for default than a mortgage, especially an FHA loan. However, after several months of non-payment the cc's will settle form less. They are also not providing your shelter. Pay for your food, utilities, transportation, then shelter. In that order. Credit cards are way down the list and should be paid last. Sorry your are facing this.

thx for the reply.   I'm underwater on the house and hoping the value will rise so I can get out.   I guess I'll start paying my mortgage on my credit cards through charge smart.  The clock will stop when my credit cards are maxed.    My goal with this post was to find out if a landlord at an apartment complex would rather take someone who defaulted on credit cards or a mortgage.   Income is protected from garnishment. 

I wonder if I told an apartment landlord that my lawyer advised me to stop paying the mortgage because I was underwear.   Would that be a good excuse to make it sound better than defaulting on credit cards   

As a landlord, I would rather you be foreclosed on than have a ton of outstanding credit cards suing you or about to.  A complex co that focuses highly on FICO scores won't take ya either way.  What's best for you financially is to short sale the house and save all payments you aren't making to get a fresh start.  The foreclosure process can take a really long time.  Stay and save as much as you can for as long as you can.  How far do you think you are under water then?

I'm underwater about 30k.   I've been doing some research on short sale versus forclosure.     They both hurt your credit score the same.    You save more money in forclosure because your in the house longer for free.  And you don't have to deal with selling it.  However,  I think the perception is that a foreclosure on the credit report looks worse than a short sale.   Would you agree that a forclosure looks worse than a short sale from a landlord perspective ?  

I have looked past foreclosures in the past. A number of money judgements though shows me that the person is a small car repair away from not being able to pay rent or utilities. 

If you can not afford your payments then I would stop paying the mortgage. Don't put payments on the credit cards unless you are getting ready to drop he double bomb and file for bankruptcy.  

thx guys.  sounds like defaulting on the mortgage is the better option since so many people who are underwater get foreclosed on.   I'll stop paying the mortgage when the time comes and keep current on ccards.   

The last question is if I should stop paying the $200 per month home owners association dues when I stop paying the mortgage.    I Read somewhere that you can be sued for those later but not sure.  and the  Heloc.   I assume those would be separate lines on the credit report since they are 3 separate companies.  Main loan, hoa, heloc.  

Have you lost income which is why you can't pay or just don't wanna pay for a home that is underwater. 

You are gonna be in a tough spot. I am understanding but I really don't wanna hear a whole bunch of rationalizations and stories of why this or that is bad. Sort of gives me the feeling that excuses will be a common theme.

Short Sale is going to require "hardship" being shown. I personally would let a short sale go before I did the credit cards. 

when you say you will let a short sale go , does that mean you would do the short sale and pay the credit cards, or visa versa 

I went from a 65k job to 22k of social security disability, which is my only income now.   I also had disability from The company for a few years but that recently ended.  

I  would recommend that you keep your home and pay your mortgage. I was in a similar situation. I'm still underwater for 30k+ and was barely making it with 50K in cc debt. I entered a debt management plan over a year ago and my credit score is slowly improving and my cc debt is now down to 37k. It's hard but can be done with lifestyle changes. I also just purchased my 1st rental property (with cash) so all things are really possible. It will be tight, but there is light at the end of the tunnel and if you stick it out with the cc mess, like me, I'm sure you'll never use credit cards the same way. My credit score is now high enough to qualify for a mortgage so I'm hopeful that with 100%equity in property #1, that I can get financing for property #2. Good luck and make wise choice. 

Loads of credit card debt means lack of any financial concern.  I wouldn't take you with loads of credit card debt.  Foreclosure, I would consider your app if everything else was legit and you were paying all your other obligations on time with income left over for housing expenses. 

I only make 22k and this is a 170k house with $700 per month just in property taxes and home owners dues.  Plus the mortgage.   I won't be able to stay.    I have never paid anything late in my life and I have a 780 credit score.    I have all the money to pay the credit cards, but I have nothing else.   I know I would have to destroy my credit to get out of then house.  After all the great advice here , I'll stay current on ccards and stop payng mortgage if needed

DOPE!!!

I think it's awesome the bank even gave someone like that 100k worth of consumer credit.  Shame on the lender.  That's awesome.

If someone in this position was paying for their shelter as priority number 1 I would look favorably on that.  Even though they might have made mistakes in the past, they realize that they need shelter, food, and water.  

Still think that's awesome though, 100k in credit cards.  I'd love to know what the person has to show for it.  Hopefully something good...

in 2007, I had made a lot of money on stocks and faxed my brokerage statements to all my banks.  I called and asked for credit line increases.  I was making 65k per year.    I now have 130k in credit lines on credit cards.   However, I lost all the money I made on the stocks and then some.  

It seems most people here think it's better to pay the credit cards.   I agree since I am underwater on the house and many people get foreclosed on after losing income like me.  My monthly housing payment is $2200 not including utilities.    I make 22k a year.   I would think many apartment landlords would understand  defaulting on a mortgage in my situation.   Defaulting on credit cards is probably perceived as more careless.  

I don't get it.  You make 22k a year.  Say you let your house go, you can't even make a dent in 100k worth of credit cards with a salary of 22k a year.  Not a dent.  

You're trying to stay in the good enough graces of the credit world so that you can rent, right?  I take it that's the crux of the issue.  

I think you would be able to find a landlord who will listen to your story and take a chance on you even if you file bankruptcy and try to get forgiven of all of that debt.  I think on message boards you get the collective, more knowledgeable people here who would say "I'd never take a chance on you" but I think there's plenty of landlords who don't do that much diligence and would listen to a story and take a chance, especially if they were in need of a renter.  You can then begin to build rapport with the new landlord, and have that reference in your back pocket after a year if you wanted to move somewhere else.

The landlords I know of in real life (not cyberspace) all have horror stories, and none did their due diligence.  A guy i work with, rented to a guy he knew had no job and then was aggravated every day that the guy didn't pay rent.  No sh*t sherlock, my God.  My mother used to own 2 rentals when I was a kid.  I asked her recently how she screened tenants.  She said she met them in person and asked if they had a job, but took their word for it.  She had problems with tenants also.  I remember it.  

Not saying due diligence solves all issues with finding tenants, but I think there's plenty in real life (not cyberspace) who take on friends of friends, or friends of family, with little diligence and get themselves in trouble.

Just my two cents.  I don't know how you're going to ever pay off 100k+ in credit card debt and at this point you'r basically paying interest only on them forever.  You are really behind the 8-ball.  The system is wonderfully set up for you to get yourself out of all of it.

I guess you missed the part where I said I have the 100k to cover the credit card debt.   If I paid the credit cards off tomorrow I would be 100% broke with not enough money to pay my monthly expenses.    And 30k underwater on the house.   I'm paying zero percent on the credit cards.  Had to pay. 3% fee on each deal for 12 or 15 months.   I've been doing balance transfers and convenience checks for 7 years.  The banks love me.   

this was the best deal I ever got recently on a ccard.   40k free for 15 months with no fees or interest on balance transfers. 

https://creditcards.chase.com/credit-cards/slate.aspx

I did miss that part, sorry.

Why does it have to be one or the other?

Why not sell your house for what you can, bring 30k to the table, get out of it, you still have 70k in cash, a 22k a year job, rent for 3-500 a month renting a room in someone's house or 1 bed 1 bath apt, and try to work your way back out of it?

Maybe I missed more to your story.  

I would hoard that cash.  Can you keep rotating that balance around on other 0% interest

What is the minimum payment on your 100k of credit card debt?

Leverage is a great thing until it isn't.  F the stock market.  Ive had my fair share of it. 

If the house is worth $170k and you owe $100k, why not sell the house off even at $150k and make someone happy, then you'll have extra money to pay off the credit cards and have savings to pay rent somewhere else?

in my first  post, I said hypothetical 100k mortgage and ccards to make them equal for the comparison decision on which to pay.   I currently have 80k on ccards and 80k in my brokerage account to cover them.    I am under water about 30k on the house if I include the agent fee.  If I sold the house tomorrow I would have to pay 30k to the bank and agent to be out clean. 

  I will be in a real bind when my zero percent ends this time because several are ending all within a 2 month period.  After you pay one off you usually don't get another offer for a long time.   And sometimes never.  

In the past, I have applied for a new card to get a new offer, and then transferred my credit line from another card to the new one.   Exp.   I have 4 chase cards.  Every time I open a new one I transfer almost all the credit line to the new card.  They let you do that over the phone.   I've got 3 U.S. bank cards ,  totally of about 12 credit cards.  

I won't be able to get new credit cards anymore though.   I was denied on the last two that I applied for because I have too much credit already.  Also, with my now very low income I cant.