25 Sep 08 
Buy and Bail and FHA’s Response
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So wouldn’t you know FHA found that the original rule for Buy and Bail was a little too steep and left many homeowners stuck in their home with no other course of action than to sell or head towards foreclosure.
If you are not quite sure what Buy and Bail means see my other articles on Buy and Bail Rules and Buy and Bail Part I and Part II
Now on to the new adjustments and how to work with this new rule to get what you want out of your Real Estate transaction.
- To be eligible to purchase a home using a FHA loan you would need to be relocating for a new job.
- The new home must reside outside a reasonable distance from your current residence and this is based upon underwriter’s discretion.
- Must have a full 1-year lease agreement from the closing date forward.
- You will need to show evidence of rental/lease by showing security deposit as cashed and/or first months rent.
- The adjusted equity position in your existing home is now 75% up from 70% but the appraisal can only be 6-months old or less. Now there is a small wrinkle in there that states you can show you put a 25% down payment based upon original purchase price but they may still require an appraisal to support the purchase price. Again the underwriter’s discretion.
Now the above rules are a good start but be prepared to have your potential rental income put under a microscope. FHA is extremely concerned about inflated rental agreements and has put in extra measures on the underwriting side of things to prevent fraud in this area.
Good news is that this amount of income that can be applied to your loan application for potential rents may be increased 15% in some cases and that will really help in qualifying for your new home.
Just in case you missed it, there are a couple ways to play the game:
- Add a non-occupying Co-borrower to you loan, must be a relative, to help you qualify.
- Make enough to cover both mortgage payments, current home and the new one.
- Short sale your home and buy before the negative reports on your credit report.
As always use a true Real Estate or Mortgage Professional because what you don’t know will hurt you in the end NOT the Realtor or Loan Officer.
Brent Lane
The Lane Group
Tags: buy and bail, closing date, co-borrower, existing home, fha, fha loan, home loan, Homes for Sale, lease agreement, loan eligibility, loan officer, loan qualifications, mortgage info, mortgage professional, Real Estate, rental agreements, rental income
10 Jul 08 Buy and Bail: The Updates are in and Changes are Coming SOON!
You need to get out there and buy a new home now!
If you own a home, considered moving and plan on keeping your existing home the new lending rules will make that nearly impossible.
I wrote a week or so ago about this Buy and Bail topic and mentioned that banks had done little in the way of rolling out changes.
UPDATE: CHANGES ARE COMING AUGUST 1st , 2008!
If you don’t buy your new home before then you will have a new guideline to follow.
30% equity in your existing home!
You read that right!
If you don’t have that much equity then you will have to sell before you can move or you will have to qualify for both mortgage payments regardless of rental income!
Now for you big earners (salary or otherwise) out there this will have limited impact but for those who consider themselves “middle America” this could be a HUGE issue.
It should be interesting to see how this impacts the number of homebuyers in the market because those who own their home and are looking to buy and retain ownership may no longer have that option.
(Side note: I think it’s sad that this rule will force some “honest” people who would truly keep their home, rent it and make the payments to sell their home before they are ready)
BOTTOM LINE: You have 3 short weeks to buy and bail (or not to bail)!
As always, I am here to help so if you have comments please put them below and if you need specific help please contact me via my BLOG www.thelanegroup.blogspot.com
Brent Lane
The Lane Group
Tags: brent lane, buy & bail, buy and bail, equity, existing home, lending rules, lending standards, middle america, mortgage payments, mortgage rules, rental income, the lane group
