Short Sale

Benefits and Drawbacks of a Boise Idaho Short Sale

Posted on by Rick & Jane May

There are many benefits to an Boise Idaho Short Sale versus a Boise Idaho Foreclosure, but there also many drawbacks to a short sale that need to be considered before deciding on the best course of action. A short sale is a great option for home owners who need to sell their home and owe more than their property is worth, but a short sale is not for everybody.

Benefits of a Short Sale

  • A short sale will not drop the FICO score as much as a foreclosure. It is estimated a foreclosure will decrease a FICO score by as much as 250 points. The estimated decreased for a short sale is 150 points.
  • The seller will be able to more quickly turn around and purchase another home after a short sale. Fannie Mae announced that effective July 1, 2010, short sellers can purchase a home with a Fannie Mae loan at 80% loan to value only two years after the short sale, and at 90% only four years after the short sale. With extenuating circumstances, Fannie Mae will allow a purchase at 90% loan to value only 2 years after the short sale. FHA requires a three year wait after a short sale, but will lender to 96.5% loan to value
  • A short sale preserves some dignity for the seller. The seller will not have a “Notice of Trustee Sale” posted on their home while they still live in the neighborhood.
  • Working out a short sale may allow the seller to avoid bankruptcy. It is important to work with someone with experience with short sales who knows how to negotiate with the lender (or lenders if there is subordinate debt as well) for Full Satisfaction of all debts.

Drawbacks of a Short Sale

  • Short sales are not exactly “quick”, although this can vary depending on the lender or lenders being paid off. Waiting for the banks to respond can be a very frustrating process.
  • There is no guaranty the bank will accept an offer. Last second maneuvers by the bank are not out of the norm. More frustration.
  • The bank will want to see income and asset documentation from the seller to verify there is a true reason for the short sale. If the seller has significant assets, the bank may go after those assets or prevent the short sale from going through.

Figuring our whether a short sale is the best solution will take research. When a home owner finds themselves in a difficult situation, whether it be because of a job less, decrease in pay, or illness, combined with a drop in property value and even worse, an increase in mortgage payments, it is important to gather as much knowledge as possible. Talk to local real estate experts who offer guidance in how to deal with the many options. The home owner should consult with their trusted attorney, accountant, real estate agent, and loan officer. Consider all options carefully, but most importantly, don’t “do nothing”.

 

For more information regarding short sales and foreclosures feel free to contact me.

 

Rick & RickandJaneheadshotJane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

 

 

 

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article is a syndicated column from Tim Storm

Important Factors To Consider When Getting Financing On A Foreclosure, Short Sale or New Construction

Posted on by Rick & Jane May

Short sales, foreclosures and new construction homes all have caveats that need to be considered when pursuing financing.

If the guidelines and potential pitfalls are not properly understood, you could face delays in closing or potentially even a denied loan.

Short Sales & Foreclosures –

 

Short sales and foreclosures are everywhere. They often represent great value when looking to by a new home.

However, they also present a unique set of problems that homebuyers need to be aware of and plan for.

 

1.) Property Condition

Typically, when homeowners are facing foreclosure or looking to short sell their house, it means they lack the financial means to pay the mortgage or maintain the property.

A property in poor health can cause many financing issues for traditional financing.  FHA loans have specific rules requiring that the property is move-in-ready, unless you’re using a 203(k) Rehab Loan.

 

2.) Timing Challenges

Short sales typically come with awkward timeframes for purchase contract approval and loan closing.

Each bank is different, but approval can take anywhere between a week to 120 days.  As a general rule, the larger the bank the longer it takes to get short sale approval.

The lack of a set timeframe for short sale approval makes the timing of loan submission, rate locks and closing very challenging. You have your approval conditions cleared to close on time, just to find out that new appraisals, income, employment and asset verifications need to be updated by an underwriter to cover the most recent 30 days. Worst case, purchase contracts and legal documents may have to be re-submitted to a bank for an updated approval.

Either way, be prepared for a lot of redundant paperwork when purchasing a short sale property.

New Construction –

 

Home buyers looking to purchase new construction using FHA financing will have more hoops to jump through than those purchasing through conventional (Fannie Mae / Freddie Mac) financing.

If you want to use FHA financing to purchase new construction then you need to be aware of a number of issues that can trip you up.

First, you MUST have a certificate of occupancy (C.O.) certifying that the property is complete and move-in-ready. If you do not have this then you typically CANNOT go FHA. You’ll need a renovation loan, but a FHA 203K WILL NOT work.

You’ll need to employ the Fannie Mae HomeStyle for a property without a C.O.

In addition to the C.O. you’ll need some combination of the following documents as dictated by your lender and your unique situation:

  • Builder’s Certification
  • One Year Builder Warranty (10 YR Warranty may be required)
  • Termite Inspection (when applicable)
  • Septic Inspection (when applicable)
  • Well Test (when applicable)
  • Construction Permits

There are a number of factors which go into exactly what combination of documentation will be required to satisfy your lender and FHA, so it is best to work with an experienced loan officer when purchasing new construction with FHA financing.

If you plan on using conventional Fannie Mae / Freddie Mac financing you’ll still have hoops to jump through, just not as many as FHA. You’ll also have a higher down payment requirement and the credit qualification guidelines tend to be stricter.

Whether it be FHA financing, conventional financing or renovation financing, it’s important to have a qualified home buying team in place that can lead you through the maze of paperwork and negotiations.

 

Rick & RickandJaneheadshotJane May
Mann Mortgage
Branch Manager/Owners
Direct: 208-861-0000
mannmortgagemeridian@gmail.com
ID MBL-2550 / NMLS # 173614/12870
www.idahohomegroup.com

 

 

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