Category Archives: options
Yes, it’s possible to buy a home ONE DAY after you short sale another home. Sound too good to be true? Well, wait a minute. There are certainly terms and conditions and restrictions that apply. Here they are in a nutshell.
You’ve probably heard that you have to wait at least 3 years after a short sale to buy another property. This is true IF you are in default: If the property has an NOD or an NOTS filed against it or you’ve missed payments, you will have to wait. You would not be eligible for this special loan program.
First and foremost, you MUST be CURRENT on ALL mortgages on the current property. No late payments are allowed on any of the mortgages. Secondly, you MUST stay CURRENT while the short sale is going on and is being processed. The short sale may take 2 to 8 months to get approval and to close, so all mortgage payments MUST be made and MUST be current to qualify for this special financing program. NO LATE payments are allowed. You also MUST have excellent credit overall as well.
The next biggest requirement is that this financing program requires a 20% down payment. For example, a house sold for $400,000 would require a $80,000 down payment, which is a substantial amount of money. You also cannot buy a house in the same neighborhood or general area that you live in currently.
The benefits to this program are huge!! First of all, you get pre-qualified and pre-approved for your new loan BEFORE you put your house on the market. So you know exactly how much you are qualified to buy before you even decide to commit to selling your current residence. You have tremendous peace of mind knowing this BEFORE your house is up to sale. Then you can start looking for a new house while the short sale is taking place. So you are simultaneously selling your current house as a short sale and looking for a new residence.
The goal, of course, is simultaneous (or as nearly simultaneous as possible) closings. You can literally buy another house ONE DAY after you complete the short sale on your current residence.
Cautions, however: The credit requirements are stringent, and not everyone will qualify. You must have excellent credit and no delinquent payments. There is no guarantee that the short sale lender/s will actually approve the short sale.
To summarize, this loan product is not for everyone. However, it does give some borrowers alternative options to renting for 3 years until buying their next residence.
If you are interested in this program, let’s talk! My phone is 909-972-1616 and my email is firstname.lastname@example.org. Please contact me for a free, 100% confidential, no obligation consultation.
In July 2011, Governor Jerry Brown of California signed the landmark SB 458, which is HUGE for CA homeowners and investors. It basically protects them against all junior lien holders if they complete a short sale on their property in CA.
Previous law, SB 931, only applied to senior lien holders. Junior lien holders had the choice to approve a short sale only if the borrower would agree to sign a promissory note to pay the full balance.
This new law, however, doesn’t require or force the junior lien holders to approve the short sale. But if they do approve the short sale, then they must accept the short payoff as full payoff and must agree NOT to pursue the deficiency judgment and must NOT go after the homeowner to sign a promissory note for the balance amount after the short sale closes.
Here are the excerpts from the Bill:
“Effective immediately for transactions closing escrow from this day forward, both senior and junior lien holders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.”
Although lenders are prohibited from pursuing borrowers to pay any additional compensation in exchange for a short sale approval, the law allows the seller to voluntarily offer a monetary contribution as an incentive to the lender for providing short sale approval. A lender is also permitted under this new law to negotiate for a contribution from someone other than the seller, such as other lenders, agents, relatives, the new buyer, etc.
This bill applies to single family homes, duplex, triplex and 4-plex residential, owner occupied or investment properties. This law does NOT apply to lenders seeking damages as a result of fraud. Also, the law does NOT apply to borrowers who are corporations, LLCs, limited partnerships, or political subdivisions of the state, liens secured by bonds, public utility liens, and HOA liens.
This is HUGE for California homeowners and investors!! This law protects you if it’s your own personal primary residence and if it’s an investment property that you own. However this plays out eventually, rest assured that if the junior lenders DO approve the short sale, you are much better off as a homeowner or an investor.
However, BEWARE if you opt for foreclosure instead of a short sale and the protections offered by this law. If you opt for a foreclosure, here’s what generally happens: Usually, the 1st lender is the one foreclosing. Let’s use some actual numbers. Let’s say that the fair market value of the property is $175,000. The 1st lender is owed $325,000. The balance on the 2nd loan is $42,000. The 1st lender will try to sell the property on the court house steps (at auction) for the balance owed ($325,000), but there will be no takers. Why? Because no investor will pay $325,000 for a property only worth $175,000!!! So the property goes back to the 1st lender and becomes an REO asset. What happens to the 2nd loan, you ask? Great question! It gets wiped out!!! This makes the 2nd lender furious! They are owed $42,000, but they get zero, nada, bupkus. Well, it doesn’t stop there. The 2nd lender can and does typically go after the homeowner very aggressively by generally selling this debt to a collection agency of some sort. That collection agency will then pursue the homeowner to the ends of the Earth with phone calls, letters, etc. demanding payment. And that’s not all!! These collection agencies will demand the FULL amount of the debt owed (in this case, $42,000). That is not a fresh start, to have these collection folks harassing you for payment after losing the property!
The HUGE advantage to this law is choosing a short sale protects you. All the junior lienholders and the senior lienholder have to agree to the amounts of the proceeds that they will receive from the short sale (and that’s where negotiation skills and experience are crucial), but once they do agree and the short sale closes , YOU ARE DONE!! Your debt is resolved!! No lender can ask you to bring money to the table. No lender can ask you to sign a promissory note to pay back a portion of this debt in the future. No collection agency will harass you. This is truly a fresh start and an amazing protection for California homeowners! Again, this protection applies to most people (please read exceptions above). So if you have more than one loan, do a short sale and protect yourself. Go forward in the future with a fresh start and a zero balance sheet.
Have you been faithfully making all your mortgage payments yet watched your equity wither away?
Have you been feeling like the Federal assistance programs have nothing to offer you?
Well, think again! The HARP Refinance Program may just fill the bill for a lot of homeowners who are current, but find themselves boxed in on all sides. They are current on all their payments and may be struggling to pay the mortgage, yet they are unable to refinance into a lower cost loan because their property values have fallen. Sounds like you? Well, read on.
The HARP (Home Affordable Refinance Program) is a Federal government program that is designed to help homeowners refinance their current mortgages into a more stable fixed-rate loan product. The mortgage must be owned by FNMA or FHLMC (Freddie Mac). It is important to understand that HARP IS NOT a plan that gives you principal reduction. In other words, you will still owe the same amount of money on the property. You will just be getting a more stable loan with a lower interest rate and more affordable payments.
This is a very new program and most lenders and mortgage brokers won’t be actually doing any HARP refinances until March 2012. But it may be advantageous to get your application in early, so apply now! Don’t be discouraged if your lender doesn’t have any information yet. For more information, visit www.makinghomeaffordable.gov or call 888-995-HOPE (4673).
Or contact me via phone (909-972-1616) or email (email@example.com). I’d be delighted to put you in contact with mortgage brokers I know who will be doing HARP refinances.
HARP is a limited-time program and will end on December 31, 2013.
Below are the most frequently asked questions about HARP. If you have any further questions, please feel free to ask.
How would I know if my mortgage is owned by FNMA or FHLMC?
If you are not sure if FNMA or FHLMC owns your loan, here is a place to start:
Check if FNMA owns your loan:
Check if Freddie Mac owns your loan:
What are the eligibility criteria to qualify for HARP?
~ You must be current on your mortgage. You cannot qualify if you are in default.
~ The property must be a residential property that is 1 to 4- family, so a single-family home, duplex, triplex, and 4-plex would all qualify.
~ The mortgage must be owned or guaranteed by FNMA (Fannie Mae) or FHLMC (Freddie Mac). The mortgage must have been sold to FNMA or FHLMC on or before May 31, 2009.
~ The mortgage cannot have been already refinanced under HARP previously.
~ The loan which is being refinanced cannot have any prepayment penalties or balloon payments.
~ The loan which is being refinanced cannot exceed the conforming loan limits of the area where the property is located. (See the next question to find conforming loan limits of your area.)
Please understand that eligibility doesn’t mean that you are automatically approved. You have to go through the application process and have the loan go through underwriting, just like every loan and every refinance does. The homeowner has to qualify with respect to income and other debts and credit score, and the property has to qualify as well, with respect to value and condition.
How can I find if my loan is within the confirming loan limits of the area where my property is located?
In most counties in the U.S., that limit is $417,000 for a SFR (single family residence). It’s higher ($625,500) for very high cost areas. To check out your county, go to: http://themortgagereports.com/loan-limits Choose “conforming loan limits” from the drop-down menu.
I am current on my mortgage payments but I had some late payments in the past year. Would I qualify?
You cannot have any late payments at all in the previous 6 months, and you cannot have more than 1 late payment in the past 12 months.
Can I qualify if my house has no equity?
Yes! The property may or may not have equity.
(Equity = Fair market value – Mortgage Balance).
Would my investment property qualify for HARP?
Yes! You can use the program for your primary residence, a residential investment property, or a second or vacation home. HARP is not designed for any commercial properties.
Would I qualify if I have junior liens?
Yes, you can. However, the junior lien holders (2nd, 3rd mortgage or HELOC, etc.) must agree to remain in a junior lien position.
Do all lenders participate in HARP?
No. Lenders are not required to participate in this program. You will have to ask your lender if they participate in HARP.
My lender doesn’t participate in HARP. What should I do?
You can choose any participating bank to refinance under HARP. You don’t have to work with your current lender.
Are there any fees involved?
As with all refinances, there are fees and closing costs involved that will vary from lender to lender. In order to incentivize homeowners to pay off their house debt sooner, there will be much lower closing costs and lower interest rates if you refinance into a 15- or a 20-year loan instead of a 30-year loan.
What would my new interest rate be under a HARP refinance?
The interest rate will be based on the market rates at the time of the refinance, and will vary from lender to lender and over time. It’s a good idea to make a spread sheet and keep track of different programs and rates and costs offered by different lenders, so that you can choose the best program for you with the lowest costs.
What is LTV and how does it affect HARP? Are there any limits?
LTV means “Loan to Value.” If your house is worth $300,000 and you have a mortgage that is $150,000, then you have 50% LTV. Loan/FMV x 100= LTV.
If you refinance into a fixed-rate loan with a lower interest rate and lower payment, there are now no longer any limits on LTV.
If you are refinancing into an adjustable rate mortgage, you cannot exceed 105% LTV. For instance, if your house is worth $100,000, the maximum loan amount is $105,000 if you are refinancing into an adjustable rate mortgage. It is important to keep in mind that even though the HARP guidelines have no LTV, many banks will have their own guidelines that may differ from HARP.