Losing sleep over the precipitous drop in the value of your home? Wondering how you can continue to make payments on that $500,000 loan when the home now seems worth at most $300,000? Casting jealous glances at the newcomers in your area who are getting bargain prices and bargain rates?
Guess what? Now you can short sell your home AND buy another house at today’s prices and rates.
Over 14 million loans in the U.S. are now either underwater or in some stage of foreclosure. About half the nationwide sales to new buyers are either repossessions or short sales. It seems to most underwater homeowners that there ought to be some way to connect the two–now there is. You can short sale your home and buy a similar property for half the price.
Lenders are now coming out with new programs, many insured by FHA, which make it possible for homeowners to short sale their homes and simultaneously buy another property at today’s prices and today’s rates. Many homeowners have allowed their homes to go into foreclosure or waited helplessly for the loan modifications that never came simply because they couldn’t figure out where they were going to live if they left their homes. Some decided to stick out the school year. Others couldn’t bear to leave the neighborhood. Now they don’t have to.
Here are a few of the guidelines that will allow homeowners to short sale their current home and simultaneously purchase another home. First, they must be current on their mortgages. So, owners who have “let the property go” or who were not financially able would not qualify. Finally, here is some reward for those who have steadfastly made their payments in the face of dropping values.
Second, they must be able to qualify for the new mortgage.That means a FICO of at least 640 and income sufficient to pay for the new mortgage.That’s not as hard as it may seem. If a homeowner can pay the $500,000 mortgage at 6% or 7%, no matter with what great difficulty, think how easy it will be to pay the $300,000 with a 5% mortgage for an identical property.
Third, the buyer must have money sufficient to pay the minimum 3.5% FHA down payment and the accompanying closing costs. The short seller will get no proceeds from the sale of his property. That’s a given. So, where will the money come from for the new property? If it’s an FHA loan, the minimum down payment is 3.5% and that total amount can be a gift. Also, the short seller is eligible for the federal tax credit which goes up to $6500 for move-up buyers. That may be applied to the down payment or closing costs, but this is not yet determined.
Finally, some programs require that the new loan cannot be more than the previous loan. So, in this case the new loan cannot be more than the $500,000 which the buyer was paying on the previous home. With the drop in prices today, in most markets, this will be an easy criterion to satisfy.
Impetus to do short sales just got much bigger. If you’ve been dithering about what to do and how to house the family after a short sale, these new loans could certainly aid in the decision-making process and give you peace of mind. Short selling your home and buying another one at today’s much lower values may, in fact, result in a significant improvement in your housing standards…