I made my first home purchase at age 22, two years ago (October, 2006). I received a 100% financing on the house because I had recently gone through a divorce and was broke so I didn’t have the down-payment money for a house. This particular loan was structured so that the first 10 years of payments were interest only. I got a decent rate of 6.5% which is fixed for those first 10 years, then it will adjust. At the time of the purchase, I was feeling as if I was increasing my net worth by owning a home. I figured that in Atlanta, the housing market was going to go nowhere but up. I couldn’t have been more wrong.

In two years, my home has lost roughly $8,000 in value and I haven’t paid a dime towards principal yet. I have no equity in it and the home is worth less than it was when I bought it. In my quest to find a bank that would refinance me at a 30-year fixed loan which wasn’t interest-only I discovered that banks no longer did 100% loans for homes. I can understand why, but now I’m really screwed. The banks that I looked at required at least 10% equity in the home. I have -6% equity in the house if you include calculating the market conditions.

Friends have told me to rent it out if I wanted to buy a new house. Once I explain my situation, they quickly hush up. If I were to rent out the house, I’d have to charge $1,000 per month to pay the mortgage (and make a very small profit of less than $100). Comparable homes can sell for cheaper payments per month, plus homes of this size and condition go for a little over $800 per month in rent. There’s too much competition for me to even bother trying.

So, I guess I’m stuck here for a while. Unless someone out there has any suggestions.