25 Sep 08 Buy and Bail and FHA’s Response
If you're new here, you may want to subscribe to our RSS feed. Thanks for visiting!
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
23 Jun 08 Buy and Bail: A Solution to an Upside Down Mortgage?
“I am more than $200,000 upside down on my current home and the bank won’t entertain a loan modification and I want out of this situation!”
This statement is pretty common these days.
It’s hard to see your same exact home now on the market for HALF of the price you paid for your home. It sure would be nice to have half the mortgage payment you have now for the same house!
The Wall Street Journal wrote this article that basically brought a hush, hush secret into the light. Every loan person knows how to do it! Banks turn their head and ignore the issue! Realtors practically endorse it! Now they want to change it?
If you are upside down on your mortgage and your mortgage was giving you some “issues” then there is a pretty good chance the thought to “Buy and Bail” has crossed your mind.
Buy- Keeping your current home and buying a new one
Bail- Once you close escrow on your new home you let your current home go into foreclosure.
Although the article states there are some changes being made to the guideline for lenders, I have been in and around the business on a daily basis I haven’t seen any changes as of yet!
“So what does it all mean? How can I get it to work for me?”
(Let me state something for the record, I am actually against the “Bail” part of this as I believe you need to find out every option you have before you pack up and leave)
· Understand what it takes to buy: The general rule of thumb is that you will need to buy a bigger home (in square footage) or be relocating to another part of the city or out of state in order to fall inside the guidelines. If you want a home that is equal to or smaller and you are NOT relocating then chances are you will have some trouble buying a new home.
· Bail: Accomplish this with limited impact to your credit: I know the popular choice is to go ahead and start missing payments on your home but before you do this obviously you will need to buy first. Once that is done you will need to address your mortgage company properly. One of the best ways to bail will be with a short-refinance. This is similar to a short sale but you can arrange for a negotiation with the current lender by an attorney for an affordable fee! To make this scenario that much more appealing, it is possible to have this go through WITHOUT missing any payments! I know you want to get rid of the property, so read more about a short refinance here.
· Take advantage of this window of opportunity: The rule they plan on changing will make you financially responsible for both payments on your old house and your new one.
I will leave you with this, take advantage but do so in an ethical way. The banks/lenders may not seem to be helpful on the outside but you can get them to work with you if the information is presented to them properly. Seek professional advice because that will be the difference between success and failure!
Brent Lane
The Lane Group
http://www.thelanegroup.blogspot.com
Tags: brent lane, buy and bail, home loan, loan, mortgage, short refinance, the lane group, upside down mortgage, wall street journal
03 Jun 08 Real Estate Buying Season?
According to the Commerce Department, home sales increased 3.3 percent in April from March, when home sales dropped a staggering 11.1 percent. However, some areas that appeared to be immune to the recent housing slump experienced drastic declines in home sales during the same period; notably King County, Seattle, where home sales dropped more than 33 percent.
The summer months are considered by many as the home-buying season, however some economists have warned that home prices may continue to fall as much as 10 percent before the housing market begins to recover.
The main issues affecting home sales are the abundance of homes for sale, more than 4.5 million, and the tighter mortgage lending practices, which have greatly reduced the amount of home sales. An inbound loan officer for Countrywide told me that his phone rings off the hook by potential buyers; however, because the individuals fail to meet the lending requirements, he is lucky to close one in twenty callers.
Tags: countrywide, department of commerce, home loan, home prices, home sales, Homes for Sale, mortgage, Real Estate
