Q: I would like to buy a house. However, I live in an area where home prices are rising rapidly, and I worry that there’s a housing bubble that could pop. If I have to move in a year or two and prices have dropped in the meantime, may I simply give the house to the bank and walk away as if I never bought it? I know I’ll lose my down payment, but are there other consequences?

 

 

A: Walking away from a house like that typically will trash your credit, making it difficult for you to buy another home for a while. Most of the ways to deal with this situation — foreclosure, deed in lieu of foreclosure (in which you voluntarily give back the house) and short sales (in which the bank agrees to accept the proceeds of a home sale, even if it’s less than what you owe) — can all wind up as black marks on your credit report and severely affect your credit score, the three-digit number that lenders use to help gauge your creditworthiness.

 

If your home is worth much less than what you owe, the lender also may go after you in court for the balance.

 

Even in a normal market, you probably shouldn’t consider a home purchase if you think you’re likely to move within a couple of years. In most areas, it takes three or more years for prices to rise enough to offset the costs of selling a home. In hot markets where prices could fall dramatically, you should be able to stay put five to 10 years if you want to avoid the possibility of being “underwater” on your mortgage.

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