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Underwater Mortgages & What You Need to Know

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Many consumers hear about underwater mortgages quite frequently and since the real estate market meltdown we have received many questions about underwater mortgages and what they are all about.

Rarely does a week go by in the current economy where you don't hear of it being written about or spoken about on the news.  But what exactly is an underwater mortgage and why should I even be concerned about the terminology?

In this discussion you will learn about underwater mortgages or upside down mortgages as they are also often called so that you can avoid getting into that predicament or at least reduce the likelihood of getting into that predicament!

An upside down mortgage is basically a mortgage loan where the outstanding balance of the home loan is higher than the current market value of the home that you own.

By owing more on the loan than your property is worth it would be difficult or impossible to sell your home and pay off the mortgage without having to dip into your emergency fund or other assets (assuming you had an emergency fund or other assets) to pay the mortgage off.

Many consumers found themselves upside down over the past several years for a number of reasons including:

  • the real estate market meltdown

  • purchasing their home when they were not properly prepared to purchase

  • obtaining a mortgage loan with terms that was adverse to their income and life stage

  • purchasing their home in the wrong location

  • purchasing a home in poor condition

  • purchasing their home when their personal and family situation was not ideal

  • tapping into their home equity with a second mortgage, a home equity loan or a home equity line of credit

  • other unique circumstances that were specific to their situation

It is important that you learn from those who purchased their home and went underwater due to reasons that were within their control as by doing so you can enhance your financial future and reach the goals that you desire for yourself and your family.

In the Atlanta market in which we operate out of—we continue to see underwater mortgages in spite of climbing real estate values over the last several years.  In fact, according to Zillow the Atlanta Market leads the nation in underwater mortgages (August 2014). 

Even so, the metro Atlanta area has seen a real reduction when you consider that it was once at 42% underwater (2013) and is now at 29% underwater (August 2014) according to Zillow.

As any home owner knows, rising real estate values are a key component of increasing your wealth (along with rising stock prices) and as far as the broader economy is concerned rising values help spur consumer confidence and spending.

In the U.S. roughly one in five homes remain underwater and that reality is having a negative drag on the overall economy.   In 2013 the rate of underwater mortgages were greater than one in four.

In Atlanta the slow job market compared to the job market prior to the real estate market meltdown is slowing home appreciation some.

Even so, since 2012 home values have skyrocketed in many areas of Atlanta!

It is important that you realize that the location that you choose to move to is critical.  At this time in many areas of Atlanta the home buying process is very competitive with investors, owner-occupants and non-profits all vying for properties that hit the market that are in move-in condition.

In the current economy it is not uncommon to make a number of offers on behalf of home buyers and still not end up with your offer being accepted.  That has frustrated many home buyers as well as real estate agents in the Atlanta Market—myself included.

Atlanta has turned into a sellers market as there are many homes that are selling above listing price due to a shortage of quality homes. 

Even though large institutional investors are not as aggressive as in years past they are still in the market in many areas of Atlanta. 

Their presence only adds to offers close too or above listing price in certain areas and in certain price ranges.

Multiple offer situations appear to be dwindling some, but with a number of buyers  and sellers in the areas of Atlanta that I have worked as of late I continue to experience multiple offer scenarios quite frequently (Summer 2014).

Many home sellers are trying to get out of underwater mortgages by selling their property as a short sale or coming out of pocket and paying the mortgage loan shortfall and moving on with their life—taking the financial loss in stride and maintaining their credit and positioning themselves for a re-purchase down the road.

It is important that if you are considering purchasing a home in the future you have an effective plan of action.

You must know that you are purchasing at a price that you can afford and you must ensure that you have discretionary income at the right level.  In addition, you must ensure that you have a plan in place to address all areas of your finances that you need to address.

You can also enhance the purchase of your home or enhance the selling of your home by purchasing our new smart guide for home buyers and smart guide for home sellers that is having a major effect in helping consumers around the globe purchase or sell their home in a manner that truly serves their best long-term interests.

By doing so you can avoid the mistakes of those who purchased or sold their home with wreckless disregard for their finances and had to sell in a distressed state in the past—or are now in a distressed situation.

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About This Article:


The above article was written by Thomas (TJ) UnderwoodThomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia. 

He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and  Managing & Improving Your Credit & Finances for this MILLENNIUM.

In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.

He is the creator of where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. 

He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind"  and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.

You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.  You can also get highly relevant tips on "living your life more abundantly" and link to and possibly earn revenue by logging on to

He is also an IRS registered tax planning professional with over 30 years of tax experience and can be reached at:



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Atlanta, GA 30349

404-952-9284 (Direct)

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