Home Loans After Short Sale Mortgage Guidelines
This BLOG On FAQ On Short Sales And Qualifying For Home Loans After Short Sale Was Written By Julie Hayward of Chicago Based EDGE REALTY LLC
How To Qualify And FAQ On Home Loans After Short Sale By Julie Hayward, President And Managing Broker of EDGE REALTY LLC:
More on Short Sales And How To Qualify And FAQ On Home Loans After Short Sale
Interview with Jeff Wolff, President of Illinois Distressed Property Solutions and Chicago Realtor Julie Hayward. Jeff Wolff has been in the business for over 15 years and negotiated hundreds of short sales with multiple lenders. This question and answer are between Mr. Jeff Wolff and Julie Hayward, Guest Writer for Gustan Cho Associates Mortgage and Real Estate Information Resource Center and President and Managing Broker of EDGE REALTY LLC. Here he provides his expertise on the most commonly asked questions regarding short sales:
Short Sale Versus Foreclosure
Why should I do a short sale vs. foreclosure?
- A short sale is the best option for your credit
- Though it will impact your credit if payments are missed until closing, your credit will start repairing itself once the short sale is complete
A Deed in Lieu of Foreclosure (DIL) is a secondary option usually offered by the lender if the short sale process does not attract a buyer for the property.
Impact Of Foreclosure On Your Credit
A foreclosure on your record is most damaging in many ways:
- It puts a judgment against the borrower(s) for the deficiency balance that the lender can come back after the buyer for up to 10 years
If a second lien holder is part of the short sale, they almost always sue the borrower(s) for their deficiency balance, causing the borrowers to take other actions such as bankruptcy.
Cash For Keys By Lender
My bank offered cash for keys. Can I get a larger seller’s concession if I do a short sale?
- This all depends on the investor who owns your loan
- Typical relocation incentives from Fannie Mae/Freddie Mac are $3000
- FHA loans start at $3000 but are often reduced to meet the net of a short sale
If the investor is someone other than those three, a current program, if qualified, is the HAFA Short Sale program with relocation incentives up to $10,000.
Timeline On Short Sale
How long does approval usually take?
- Typical short sales take about 90-120 days
- FHA loans typically take more than 6 months due to strict guidelines
Short Sale Process
What is the process and what is important to know about the process?
- We always pre-qualify a seller as to whether they will qualify
- The number one question is: what is your hardship?
Short Sale Approval When Auction Is Around The Corner
My auction date is less than a month away. Can I still do a short sale?
- In most cases, yes, but you have to act quickly and provide the required paperwork to the lender
- The property needs to be listed and your short sale team in place with third-party authorization
Stopping The Home Auction
If I get the paperwork in by the required date, will it stop the auction?
- This all differs by the lender and the investor who owns your loan
- It also depends on the county your property is in
- It’s best to make the decision to do a short sale before an auction is set
If this isn’t possible, your best chance of success is greater than 25 days before the auction.
Qualifying For Home Loans After Short Sale And Timing It With Moving Out
My short sale got approved. What if I can’t find a new home by the approval deadline?
- Once a short sale starts, I advise the sellers they need to have an idea where they may move next
- There should be a minimum of 90 days from the time the property is listed before a closing
- A future landlord should understand you have suffered and your credit score is going to be lower but you took the initiative to short sale and start anew and landlords are fairly reasonable if you explain properly
There have been millions of homeowners who have had to short sale in this country and had to find a rental with lower credit.
Repairs To Home
I can’t afford lawn care or repairs. What can I do?
- Your short sale team with work with the lender’s property preservation group to cut the grass, or winterize the home in the winter if vacant
- They will not do any repairs, though
- They will ensure the lawn is maintained and house secure if it is not occupied
Challenges With Short Sales
What are the biggest challenges with short sales?
- Getting full cooperation from the sellers
- Getting a fair bank appraisal/BPO
- Getting an offer in a weak market
Can I Get A Bargain On A Short Sale Home?
I am an investor, how low will a lender go on a property? (I get asked this all the time: “What do you think the lender will accept?”)
- An upfront analysis is done before all short sales are listed
- We can determine a range of what the fair market value is as perceived by the lender
- The lenders will generally accept as low as 88% of FMV determined by their appraisal
- Lenders do not put any emphasis on a cash deal in most cases
- They want the highest amount for the investor
Home Loans After Short Sale: Loan Modification Versus Short Sale
Can I apply for a loan modification at the same time as putting my property on the market for a short sale?
- No. If home retention is the goal, a loan modification should be completed before a short sale
- If you are denied a loan mod, you will automatically qualify for a short sale, which is when you will then list the property
Home Loans After Short Sale And Costs Of Short Sale
What does it cost me to do a short sale?
- There are usually no costs to the borrowers for a short sale if qualified
- All fees such as commission, attorney, tax, and title charges are credited by the lender from the accepted purchase price of the buyer for that property
- If a seller has more than $5000 in liquid assets (bank accounts) the investor may request a 20% cash contribution of that amount
What Price Will Lender Accept
I know the property is worth more than the bank is accepting. Why are they accepting that amount?
- The amount the lender accepts on any short sale is based on their current BPO or Appraisal and typically will accept 95% of that value
- It’s all based on the value the lender receives from their appraisals
Deficiencies On Short Sales
What happens with the deficiency balance if I complete a short sale?
- If the property is your primary residence, you will qualify through 2016 for the 2007 Mortgage forgiveness act
- A 1099-c will be issued and that amount goes on the IRS 982 form and zeroes out any tax liability
- Congress should extend for another 2 years but they typically do it in December of the calendar year
- If the property is an investment, the sale will most likely result in a capital loss to offset the deficiency balance
- Please seek a Certified Public Accountant for your situation
About The Author Of Home Loans After Short Sale
Julie Hayward is the author of this article, Home Loans After Short Sale.
- Julie Hayward is a contributing associate writer for Gustan Cho Associates
- Julie Hayward is also the author of the recently released book, OPPORTUNITY KNOCKS
- Julie is a veteran Chicago Real Estate Agent and the President and Managing Broker of Chicago based EDGE REALTY LLC
Gustan Cho Associates like to thank Julie Hayward for writing this article on Home Loans After Short Sale. Looking forward to the upcoming BLOGS that will be published by Julie Hayward.
Qualifying For Home Loans After Short Sale
Here are the requirements to qualify for home loans after short sale:
- FHA requirements to qualify for Home Loans After Short Sale is a mandatory waiting period of three years from the date of the short sale with a 580 Credit Score and 3.5% down payment
- VA requires a 2 year waiting period after a short sale to qualify for a VA Loan with no down payment with a 580 credit score
- USDA has a three year waiting period after a short sale for a borrower to qualify for a USDA Loan with no down payment with a 580 credit score
- Both Fannie Mae and Freddie Mac has a four year waiting period after a short sale for a borrower to qualify for a Conventional Loan with 3% to 5% down payment and a 620 credit score
- Homebuyers can qualify for a NON-QM LOAN after a short sale, deed in lieu of foreclosure, and/or foreclosure with NO WAITING period
- There are no waiting period requirements after a short sale, deed in lieu of foreclosure, or foreclosure with non-QM loans
- However, 10% down payment is required
If you are looking for Home Loans After Short Sale or Foreclosure with no lender overlays, contact Gustan Cho Associates at 262-716-8151 or text for faster response. You can email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays to take your mortgage inquiries.