There's great debate about whether or not what you're proposing is ethical. putting that debate aside, there is little that can be done to prevent your plan. If you can qualify to purchase the 2nd home, then let the 1st home go, there's little the bank can do to prevent you from moving forward. Just be careful not to use the same bank for the new loan that's the lender on the previous one.
Evan A. Nielsen
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Evan A. Nielsen is licensed to practice law in California. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.
Assuming that you do not have a second mortgage on the first home, and that you can qualify to purchase the new house, there is no legal problem with what you are doing. You will want to make sure that your new loan is not secured by both the first house and the second house.
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I agree with both previous answers, and as long as the deed of trust is foreclosed in a trustee's sale and there is no second your credit will take hit but the they will not get a defciency judgment unless there is a judicial foreclosure or a second mortgage.
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