Upside Down on Your First House? Just Buy a Second One!

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Oddly, the best way to deal with being upside down on your home mortgage may be to just go out and buy a second house.

As housing values spiral down and people increasingly owe more on their loans than their homes are worth, many start to look longingly at a different house -- perhaps something smaller and cheaper and that better reflects their new financial reality.

But can you even consider buying another house while you need a snorkel on the first one? Surprisingly, the answer is a strong "probably."

1. Your Credit

If you have continued to make your mortgage payments and pay all your other bills on time, your credit is untarnished. In order to get a loan for the house you hope to buy, you will need untarnished credit.

2. Your Income Stream

You need a job that pays you enough money to cover the debt of a new mortgage as well as your other existing expenses. If you are self-employed, you need two years of income tax filings showing a profit.

You probably are among the millions of people who can afford one house -- in your case the upside down one -- but not a second home. One way around this is to convert your existing home into an income property where you collect rent. That will boost your income stream.

3. Assets and Debts

Lenders will look at your assets and debts. Your upside-down house is not an asset and your mortgage on it is a debt. The answer is to have other assets -- such as your savings, stocks and bonds, 401(k), IRA., your paid-off cars, boats. Yes, we all wish that we had more equity in our homes, but those days are gone.

4. Cash

To buy another house, you will need cash to put down, which is where the rub comes in for a lot of people. Do you have enough money to put down what the lender will require, figure 20 percent of the purchase price?

With good credit, money for the down payment, a steady job and assets outside the ownership of your underwater home, your chances of being able to buy another house are good.

Once you close escrow on your new home, you might try for a loan modification or a short sale on your first property. Both of those actions will tarnish your credit, so wait until the ink dries on your new place before starting down that road. Short sales will render you unmortgageable for about two years, say experts.

Another way to avoid those credit dings would be to embrace your accidental landlord status. Renting out your first home can cover or at least help offset the expenses and comes with a whole set of tax advantages that you should speak to your accountant about. This would buy you some time for the market to recover and for you to again be building equity in your home instead of being upside down. The less optimistic crowd says that might be when hell freezes over, but you probably know your local market better than they do.

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Upside Down on Your First House? Just Buy a Second One!

Believe it or not, the median price to buy a home in America is just north of $170,000. This may come as a surprise to coast-huggers in some of the nation's more affluent cities, but the rest of the country's been in on the secret for years. And guess what -- great homes can be found for even less than the national median. Click through to see some of the finest homes for under $150,000.

Location: Cleveland Heights, Ohio
Price: $100,000
Beds/Baths: 4/2
Size: 1,523 sq ft

This mini-colonial has four bedrooms, a fenced-in backyard and a two-car garage. 

The home's interior has the hardwood floors and crown molding of a much more expensive abode.

See more affordable homes for sale in Cleveland Heights:

Three-bedroom family-friendly townhouse.
Newly renovated front-porch colonial
Townhouse with swimming pool. 

The kitchen boasts granite countertops and stainless steel appliances.


See more affordable homes for sale in Cleveland Heights:


Charming single-family colonial
Tall brick row house
Four-bedroom on a wooded lot

A formal dining room infuses the home with Old World character. 


See more affordable homes for sale in Cleveland Heights:


Four-bedroom brick colonial
Spacious Cape Cod
Neat, trim colonial

Location: Phoenix, Ariz.
Price: $100,000
Beds/Baths: 4/2
Square Feet: 1,300


This recently remodeled four-bedroom ranch house is a great starter home within close proximity of respected schools. 

The home offers residents a large den (pictured here) and spacious backyard. 

See more affordable homes for sale in Phoenix:

Ranch home with mountain views
Brick and stucco town home
2
,000 square-foot contemporary

Recent renovations provided the home with new flooring and a fresh coat of paint.

See more affordable homes for sale in Phoenix:

Single-family ranch house
T
hree-bedroom ranch house
Stone house with community pool 

As this picture makes clear, the home is amenable to adorably-decorated bedrooms. 


See more affordable homes for sale in Phoenix:

Row home with garage
2,000 square-foot ranch house
Santa Fe-style five-bedroom

Location: Colorado Springs, Colo.
Price: $99,900
Beds/Baths: 2/1
Size: 748 sq ft

This downhome ranch house offers a neat, fenced front yard and 750 square feet of coziness.

The living room is spacious enough to accommodate a large sectional sofa--though we might choose to put it somewhere other than in front of the window. 


See more affordable homes for sale in Colorado Springs:


Countryside contemporary
1
,700 square-foot town house
C
ondo with city view

The kitchen has a country-style tiled backsplash, wood cabinets and marble countertop. 


See more affordable homes for sale in Colorado Springs:


Upgraded four-bedroom with pool
F
our-bedroom in El Paso
Cute row house

Who says you need a porch to enjoy a porch swing?


See more affordable homes for sale in Colorado Springs:
1920s bungalow 
Three-bedroom ranch with mountain view
Smart condo with swimming pool

Location: Montgomery, Ala.
Price: $99,900
Beds/Baths: 4/2
Size: 1,493 sq ft

This tidy brick ranch house has four bedrooms, two bathrooms and nearly 1,500 square feet of living space for just under $100,000.

The large living room has a fireplace and pass-through to the kitchen. 

See more affordable homes for sale in Montgomery:
Three-bedroom in the woods
Sprawling ranch house
Charming single-story three-bedroom

The kitchen has tile flooring, a center island and no shortage of storage space. 


See more affordable homes for sale in Montgomery:
Brick-built three-bedroom
Well-landscaped four-bedroom
F
our-bedroom dutch colonial

In addition to a sizable front lawn, the house has an even larger backyard.

 
See more affordable homes for sale in Montgomery:

Three-bedroom in the woods
Sprawling ranch house
Charming single-story three-bedroom



See more affordable homes for sale in Montgomery:

Location: Indianapolis, Ind.
Price: $100,000
Beds/Baths: 2/1
Square Feet: 2,052

While this pre-war bungalow has only two bedrooms and one bathroom, you can choose from seven other rooms, including a game room and family room.

The family room has hardwood floors.


See more affordable homes for sale in Indianapolis:

Dual-level three-bedroom
Ante-bellum victorian
Charming one-bedroom town home

Off the family room is the kitchen, with marble countertops and ceramic-tile flooring. 


See more affordable homes for sale in Indianapolis:


Three-bedroom brick ranch house
Spacious brick-and-wood four-bedroom
Rustic colonial

Plenty of windows keep the interior bright.


See more affordable homes for sale in Indianapolis:

Dual-level three-bedroom

Antebellum victorian
Charming one-bedroom town home

Location: San Antonio, Texas
Price: $150,000
Beds/Baths: 2/2
Size: 1,445 sq ft

This homey ranch house offers the basics along with surprisingly comfortable outdoor living amenities.  

There's plenty of space for lounging in the family room.


See more affordable homes for sale in San Antonio: 

Columned three-bedroom with two-car garage
2,300 square-foot landscaped three-bedroom
Four-bedroom with game room

French doors in the master bedroom open onto a deck. 


See more affordable homes for sale in San Antonio: 
Inviting single-family on cul-de-sac
Elegant starter home
Brick three-bedroom with two-car garage

Out back, a shade garden features a fountain and cocktail pool. 


See more affordable homes for sale in San Antonio: 
Columned three-bedroom with two-car garage
2,300 square-foot landscaped three-bedroom
Four-bedroom with game room

Location: 1600 W Green Rd, Apt 304
Price: $149,900
Beds/Baths: 2/2
Size:  1,247 Sq Ft


For some of the best deals, homeowners ought to consider investing in condo developments. This affordable unit offers cosmopolitan charm without the big city price tag.


See the full listing.

The unit features a split-bedroom floor plan and a cozy, contemporary layout.


Other affordable homes for sale in Glendale:


Eye-popping 1920’s condo
Three-bedroom with special mortgage options
Remodeled three-bedroom bungalow

A library with a view for the urbane urbanite.


See more affordable homes for sale in Glendale:


Homey three-bedroom ranch house
Remodeled brick ranch home
Well-kept Pre-War  Bungalow

Full kitchen with updated appliances


See more affordable homes for sale in Glendale:

Stunning four-bedroom family home
Two-bedroom bungalow on the cheap
Newly renovated three-bedroom

Location: 254 111th Avenue Nw
Price: $149,000
Beds/Baths: 4/2
Size: 1,585 Sq Ft


This four-bedroom family house features a host of recent improvements, including a new kitchen and updated baths. Starter homes need not be tiny homes.

A look at the home’s spacious open floor plan, including living and dining rooms.


See more affordable homes for sale in Coon Rapids:

Move-in ready four-bedroom
Newly listed five-bedroom
Sweet two-bedroom on Kumquat Street

New granite countertops were installed in the home. Buy now and the home includes a one-year home warranty.


See more affordable homes for sale in Coon Rapids:


Spacious three-bedroom
Five-bedroom green thumb’s dream
House on Hummingbird St. for a song

A closer look at the well-appointed living room.


See more affordable homes for sale in Coon Rapids:


A newly renovated two-bedroom
Brand new three-bedroom town home
Single-family with a big yard

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