Homeowner Short Sale Information
Griffin Knights Realty Corp. can help homeowners to stop foreclosure with a Short Sale of their home through education!
If you answer YES to any of the questions below, or you know someone who has answer YES to those or similar questions, then a short sale or even a loan modification might be right answer for you.
|Medical condition?If you have had a medical emergency that knocked you out of the workforce for an extended period of time, or you became ill, you might qualify for a short sale.|
|Unexpected involuntary reduction in your salary OR an unexpected job layoff? If you had reduction in your pay, or you were laid off, you might qualify for a short sale.|
|Death in the family? If a family member has passed away and the remaining family member can not make the mortgage payment, you might qualify for a short sale.|
|Divorce? If a divorce between two married people befalls and the mortgage payments cannot be maintained, you may qualify for a short sale.|
|Are you behind on your mortgage and afraid of losing your home through foreclosure?|
|Has your adjustable rate mortgage adjusted causing a higher mortgage payment and you can not keep up with the payments?|
Short Sale Process
You will need to determination, focus and patience to get through the negotiation process. Further, you will be required to work closely with your Short Sale Real Estate Agent and your mortgage lender.
When Buying a Short Sale
- Buying a Short Sale Home using an FHA Home Loan just got tougher
Buying a Short Sale Home using an FHA Home Loan just got tougher
Securing an FHA mortgage to buy a short sale home is about to get more expensive meaning tougher for some folks.
In a statement issued on January 20, 2010, the Federal Housing Authority – FHA – outlined policy changes to its mortgage lending programs. These policy changes indicate a major shift away from making housing affordable and available for many Americans – which has been the FHA’s mission since its inception. It appears that the agency is making a move to ensure that only those homebuyers who can afford to buy a home and who have demonstrated some credit worthiness are going to be able to use the FHA home mortgage programs to purchase a home.
To read the FHA’s statement, it’s clear what the group is trying to balance. On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.
To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.
Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.
All of these changes spell bad news for consumers as they can expect higher costs and needing more money to buy a home using any FHA home mortgage program.
As listed in the official announcement, there are 3 major guideline updates for the FHA:
- Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
- Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
- Seller concessions are being limited to 3%, down from today’s allowable 6%
Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.
As a result of all these changes, homebuyers should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”. Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.
Some have other guideline overlays, too.
The FHA’s new guidelines don’t go into effect until spring. So, between now and then, the old guidelines will apply. Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.
Talk to one of our agents about FHA home loan financing to buy a short sale home.
- New Good Faith Estimate beneficial for buying a Short Sale
New Good Faith Estimate beneficial for buying a Short Sale
HUD has enacted changes in the Good Faith Estimate that start January 2010 and some much more in the spring of 2010.
The changes to the good faith estimate (GFE) are designed to assist you to in determining what sort of loan you are being quoted, what it should cost you to get it, and give you you an opportunity to examine home loan programs from multiple mortgage lenders.
Once you apply for a mortgage to purchase a short sale home you are supposed to get a good faith estimate within three business days from your mortgage lender – unless your mortgage lender declines your short sale mortgage application inside those three days.
New Modifications Towards the Good Faith Estimate
- Stronger Disclosure – The adjustments are organized to present you with even more total disclosure from your loan officer in relation to the mortgage loan program(s), mortgage rates, factors, fees, terms, closing costs, and other vital details that your loan officer quotes you.
- Allowable Modifications to Good Faith Estimates and Actual Closing Costs – Another main function within the new good faith estimate alterations is to spell out what fees are not allowed and what fees are allowed to switch between your quote and the actual settlement costs once they have been quoted to you by your loan officer.
- A No Cost Home loan comparison – The brand new good faith estimate should indicate the results to getting a no cost house loan versus getting a usual mortgage loan with ordinary costs. Overall, no cost mortgages have elevated mortgage rates than those home loans having expenses.
Contact one of our California based short sale real estate agents if you are interesting in buying a short sale home in California.
Start your California short sale home search
- Open a Roth IRA while you wait to Buy a House
Open a Roth IRA while you wait to Buy a House
With the economy where it is today in September 2010 many people who have had their eye on buying a short sale home sit and wait for the right moment. Some of the reasons why people are sidelined are because:
- of the uncertainty around their job situation.
- Others are waiting because they don’t trust that we’re out of the housing slump meaning that any house they buy now could lose value – this is especially true in California with the huge numbers of foreclosures and short sales available on the market.
- And there’s still another group of side-liners who don’t have the money for a down payment, or don’t have the credit scores to qualify.
There’s not much to say about waiting on a job situation which is tied to the economy. It seems like a prudent action to take to wait through the job market uncertainty until a time when there is more stability with employers. Likewise, not wanting to buy a house while there may be some more downward direction in home values seems pretty reasonable too.
But, for the the situation of not having enough money to purchase a house or having poor credit there are quite a few actions you can take to get yourself in a better situation for home buying in the future.
Let’s start first with not having money for a down payment. One way to save for a down payment which would make incredible sense would be to open an IRA. This would accomplish two things: start your savings for retirement and give you a pot of money that you could use to buy a home in the future. In certain situations you can withdraw money from your IRA (traditional or Roth) to buy a home without penalty or taxation.
Next, for your credit being less than perfect you should take the steps necessary to improve your scores. Now this might seem obvious and a no brainer, but many people do not know how to improve their credit scores and report. If this is you you may want to start researching how to do credit repair. You can either do it yourself, or you can work with a company to it for you. Either way, knowing about the process will help you tremendously as you work to improve your scores.
- Buying a Short Sale using your VA Loan
Buying a Short Sale using your VA Loan
If you are in the market to buy a home, a short sale could be a great option – especially if you have VA loan benefits and you live in the California area. As of August 2010, there are an incredible amount of homes on the market for sale that could be sold as a short sale, or are already approved for a short sale.
One of the requirements of buying a short sale home or any home for that matter with your VA Loan eligibility is that you will have to get an appraisal on the home. The short sale price will have to match up with what the VA appraiser says the home is worth. The appraisal is a good thing for you if you are the one buying the home because this will help price the home at a fair market price and prevent you from buying a home that is over priced or even physically trashed.
Where buying a home on a short sale is different than buying a foreclosed home is that with a foreclosed home, the lender who owns the home is not likely going to do any repairs on the home if need be. Whereas with a short sale, you may have the opportunity to get some home repairs done by the homeowner in the case where the VA appraiser identifies some problems with the home that would prevent the approval of a VA loan.
If you are stationed in California or have VA eligibility to buy a home, please contact us to look at short sale homes for sale.
- How to Save for a Down Payment on a Short Sale
How to Save for a Down Payment on a Short Sale
If you’ve dreamed of owning your own home, now may be one of the best times. You can find deals on foreclosures and short sale that are incredible, plus the mortgage interest rates are lower than they have been in years.
One thing that may be holding you back is coming up with a down payment. The amount you actually need to buy a short sale, bank owned, or whatever, does not depend on the type of sale it is but on the type of mortgage financing or loan you are using. With an FHA loan you need 3.5% minimum, for example. A USDA loan or VA loan could be lower. Of course, the larger down payment you can make, the smaller your mortgage payments and mortgage insurance will be, so saving up for as large a down payment as possible is to your advantage.
So how do you save up for a home down payment? Well, there are a lot of strategies for saving money. But let’s get down to basics. If you have an income, you need a budget. Write down everything you spend, and subtract it from what you make. (If your answer is a negative number, then you really have a problem – but keep reading because these tips will help you.)
Now that you’ve written your budget, there are some things you need to decide.
What can I do without?
- If you eat out for lunch every day, for example, you are wasting a huge amount of money in a year. Try brown bagging four days a week, and treat yourself on Fridays. You might find you are eating healthier food and losing weight as part of the bargain.
- If you buy expensive coffee drinks every day, you might try getting an espresso machine and making your drinks at home.
- Save transportation costs by carpooling, riding the bus or train, or riding your bike.
- Take a “stay-cation”. Find fun things to do close to home and skip the fancy cruise or big trip for a year or two while you are saving for your home.
How can I increase my income?
- Basically, you can only save so much of the money you are bringing in. The rest has to go to paying essential bills. So one way to save more is to make more. Getting a raise or promotion may not always be possible, but you could take on a second job or start a side business. These could be temporary measures until you reach your financial goals.
How can I reduce my debt?
- Now that you have some extra money from all the saving you’ve been doing, see if there are ways you can pay down any debt you may have. High interest credit cards eat up your money fast. Your goal is to pay them off completely and then continue paying them off monthly. Until you can pay them off, make sure you are avoiding extra fees by paying on time. This helps your credit score as well.
- Think about paying off your car as soon as possible. Plan on keeping your car longer and just getting it repaired instead of trading it in. Repairing a car that is paid off is always less expensive than having a car payment.
What are some other sources of money?
- You can use your tax returns to add to your savings account.
- Use cash gifts you may receive, such as for birthdays, graduations, or anniversaries to help you reach your goals.
By now, you should be a savings pro. Just make sure you are putting all that extra money into a savings account or Certificate of Deposit. Soon you will have enough money to buy that short sale home you’ve been dreaming of.
- Benefits of Buying Short Sales
Benefits of Buying Short Sales
With the steep fall in home values, there are some great deals to be had in California’s real estate market. You may have thought of taking advantage of low home prices by buying a short sale with the help of an experienced realtor. Let’s see what a short sale is, its benefits, and how to avoid the pitfalls of short sale offers.
What are the benefits of short sales?
A short sale by definition is a home that is sold for less than what the seller owes on the property. The seller also does not have available funds to make up the difference. For sellers, a short sale can provide a way to avoid foreclosure with its accompanying penalties. For lenders, a short sale means getting most of the property’s value without the legal and financial costs of foreclosure. Finally, for buyers, a short sale is a great opportunity provided they have cash or have pre-qualified for a mortgage and can wait the 2-6 months required in the short sale process.
Avoiding short sale problems
- Rejection from lenders – If your offer is much lower than the fair market value of the home, it’s possible the lender could reject it, which means you have wasted a lot of time. The lender could make a counteroffer also, which could add weeks or months to the process. Use your real estate agent to come up with an equitable first offer to avoid rejection.
- Unacceptable terms of the contract – Assuming the lender accepts the short sale, the seller could be asked to repay the deficit on the original loan. At that point, the seller may pull out of the short sale. Lenders can also change the terms of the contract to something less acceptable to the buyer. Your agent can help you avoid lenders who commonly have these issues.
- No repair credits – Most short sale homes are sold “as-is”. Lenders often do not give repair credits because they are already taking a loss on the home. Be ready to pay repair bills up front, or shop around for a short sale that is in good condition.
Buying a short sale can take a lot of time and patience. That’s why it’s always best to get the help of a real estate agent who has experience in short sales. If you can persevere, a short sale can be a great value for you and your family.
- Buying a Short Sale Home as your First Home
Buying a Short Sale Home as your First Home
Many people who are buying a home for the first time report that they are both nervous and excited at the same time. This is normal because there are mixed feelings of nervousness and excitement all rolled into the same experience. This can be especially true when you are buying a short sale and you are faced with waiting for months for the mortgage lender to make a decision about accepting your offier.
A First Step To Take: Get Pre-Approved
A great starting point for buying your first home, is to get your hands on a copy of your credit report to learn your credit score. Be sure that your credit report does not have any incorrect information on it. If your credit report does contain errors, you will want to get the information corrected before trying to get your mortgage approved – this is especially true if the mistakes have to do with late payments or collection accounts.
Here are the things that you will need to get pre-qualified or pre-approved:
- Gather your financial information – 30 days of pay stubs, 2 months of bank statements, last quarterly IRA and 401K statements, last year’s W2?s. You will want to provide this information to your loan officer once you select one as part of the loan application and approval process.
- Research Loan Programs, FHA Mortgages, First Time Home Buyer Programs
- Find a Mortgage Company or Lender to work with – check with your real estate agent for some referrals to good lenders – all agents know someone.
- With your lender, determine the price range of homes that you qualify for.
- Decide how much you think you can spend each month on a monthly payment.
Real Estate Agents Help You Shop
When you begin your home search for a short sale home, you will want to work with an experienced real estate agent who has handled homes that have gone through the short sale process. Our agents have experience in handling short sales.
Most people start their home search by searching on price range or location as well as what features you want in a home. The agent should set you up on some sort of automated email system that will send you new listings every day. Start your short sale home search.
Once you begin working with your Realtor to visit some houses you will want to take notes about each home you visit. Take a camera so you can take pictures to remember each home. Trust us on this; you won’t remember the specifics otherwise, once you have visited more than about 5 homes.
Once you find the house that you like, it is time to write up a sales contract with your agent. The sales contract approval process on a short sale home can take several months which can be nerve wracking. This is the time you need to be patient.
On a short sale offer, the lender is going to evaluate what sales price they can “afford.” Short sales transactions are about the lender taking a loss on the amount of money that is owed by the home owner versus the sales price that you offer. The lender will decide whether they can sell the home, or whether it is in their best interest to foreclose on the home and resell it later. View more questions about the short sale process.
Once your offer is accepted, your agent can help you make sure that appropriate inspections are scheduled and completed.
From here, if your offer is accepted, you should have relatively smooth sailing if you had already provided your lender with your loan application information like your pay stubs and bank statements etc.
- How to Find Short Sales in your Area?
How to Find Short Sales in your Area?
With all the homeowners defaulting on their mortgages these days, there are a lot of short sales currently on the market in California. How does a potential buyer find short sales, though? What does a buyer need to know about short sales? Here are some tips on how to find short sales.
Short sale basics
A short sale can be the result of dropping property values, making the home worth less than the balance of the mortgage on it. Inflated appraisals and property values can also cause homes to be purchased for more than they are really worth. When the market adjusts back down, many homeowners find themselves underwater on their mortgages. When the owner agrees to sell the home for an amount that is less than the home’s present mortgage balance, then the lender must approve the short sale, because the lender is taking a loss.
Buyers should be careful when considering a short sale. A short sale can take a long time to close, and a lender can pull out of a short sale agreement so the sale never closes at all. Many short sale prices that are advertised are not real prices but estimates at what it will take to sell the home. If you are still interested in buying a short sale, here are some ways to find them.
How to find short sale listings
Most importantly, find an agent who is experienced in dealing with short sales and can give you sound advice. Sellers’ real estate agents list short sales. These listings are on local web sites and in MLS feeds. Lenders have complained about advertising identifying a listing as a short sale because they feel buyers offer less when they know it is a short sale property, and they are generally right.
Agents frequently slip in wording that identifies a listing as a short sale, so look at the listing carefully. Here are some terms to look for:
- Subject to bank approval
- Notice of Default
- Give the bank time to respond
- Preapproved by bank
- Headed for auction
Every MLS system is different, but with the advice of your short sale real estate agent, you should be able to find suitable listings in your area.
When Selling a Short Sale
Knowing what to do about a delinquent mortgage or an upside down mortgage or a hardship can make all the difference when it comes to avoiding foreclosure on your home and saving your financial future.
With this said, we have put together some important information about mortgage delinquency, short sales and stopping the foreclosure process for your benefit. Feel free to read any of the articles below and if you know anyone who could benefit from this information please pass it on.
- Do I have to Pay Taxes after my Short Sale?
Do I have to Pay Taxes after my Short Sale?
News Flash – Short Sales No Longer Carry Federal Tax Consequences!
Why? The Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648). The Mortgage Forgiveness Debt Relief Act 2007, (H.R. 3648), recently signed into law by President Bush, now excludes discharges of indebtedness on a tax payer’s principal residence for the purpose of calculating the individual’s annual taxable income. Visit the IRS.Gov website to review the Mortgage Forgiveness Debt Relief Act Summary Page
You may have heard that if you lose your home to foreclosure or sell your home through a short sale that you will owe income tax on the forgiven debt. While this was mostly true just a few years ago, the Mortgage Forgiveness Debt Relief Act of 2007 has completely changed the tax liability landscape for homeowners facing foreclosure or a short sale.
Just a few years ago, losing a home to foreclosure or through short sale meant a that a homeowner could face a huge tax burden after all the dust settled.
Consider the following Short Sale Sample:
Let’s say a home owner’s existing mortgage is $300,000, but with the assistance of a qualified REALTOR specializing in Short Sales, the home owner sells the property to a buyer for $200,000. This difference is $100,000 in forgiven debt which used to become taxable income. Something the IRS calls cancellation of indebtedness income.
Continuing with our example, if this home owner’s federal income tax rate is 30%, they would owe the IRS approximately $30,000 in federal income tax, in addition to having the blemish of a short sale on their credit report. Can you imagine the stress of losing your home, and having a huge tax bill on top of that for a home that you don’t own anymore?
Cancellation of indebtedness income tax, or phantom tax as some critics have called it, remained an obstacle for innumerable home owners experiencing financial hardships and considering a Short Sale of their home as an alternative to foreclosure. Many homeowners simply could not afford the additional tax burden assumed by proceeding with a Short Sale. At least that was the case before this new legislation was passed.
Prior the new legislation, however, there were two existing exceptions to the federal tax code relating to the cancellation of mortgage debt. The first exception said that if a home owner is insolvent at the time their debt is canceled, then no additional federal income tax is owed.
What does insolvent mean? It means if the homeowner adds up all their assets, such as cash reserves and the value of other property owned, but excluding many retirement funds, and subtracts all other liabilities and ends up with a negative number, they are technically insolvent. Simply put, if the home owner owes more than they have in assets, they are insolvent.
The second exception involves non-recourse loans. In many states such as California, loans used to purchase a primary residence are typically considered non-recourse, and once again carry no added federal tax liability when sold as a Short Sale or through foreclosure.
Passage of the Mortgage Forgiveness Debt Relief Act 2007 means the old insolvency tests are no longer the ONLY criteria that decides whether or not a homeowner will have cancellation of debt income tax liability.
Now, homeowners are assured they will not have a cancellation of debt income tax liability when completing a Short Sale (or foreclosure), so long as the property qualifies as their principal residence and the total amount of canceled debt does not exceed $2 million.
For real estate investors, the insolvency exceptions continue to be critical in a challenging real estate market because these individuals many own numerous properties, aside from their primary residence, at risk of foreclosure. Because in many instances the investor is insolvent, they avoid federal tax liability for cancellation of indebtedness.
- Hardships – Short Term vs Long Term
Hardships – Short Term vs Long Term
Financial hardship – it seems like most of us suffer through some type of financial hardship in our lifetimes. Fortunately, for some, the financial hardship can be short term. But for others, the financial hardship can be more long term and hence more serious. We’re going to look at the difference between long term and short term financial hardships and explore some of your options depending on the type of hardship you are or have experienced.
If the hardship behind your current mortgage delinquency is temporary, there are numerous alternatives available to you directly through your mortgage lender.
A few of the options available to homeowners experiencing temporary financial hardship, include:
- forbearances, an option in which you agree to stay current on the loan going forward and to a schedule of repayments on any delinquent amounts;
- loan modification agreements;
- loan reinstatements.
If the particular hardship behind your mortgage delinquency is long-term, or if your situation is more complex our team of seasoned short sale realty professionals are qualified to help you assess whether listing your property as a short sale is an appropriate solution.
Lender Consideration Of Your Short Sale Request
While a lender’s consideration of a short sale offer does not stop a pending foreclosure, in certain cases lenders will delay foreclosure proceedings if a qualified purchase offer is presented to them before the property is sold at foreclosure auction (trustee sale).
The good news is that increasingly many lenders will work with homeowners and their REALTORS on short sale listings and consideration of purchase offers by qualified buyers.
The key here, no matter what type of hardship, is to submit a thorough, well organized, Short Sale package – Short Sale Request – using a qualified, licensed REALTOR experienced in short sale packaging and direct negotiations with mortgage lenders.
Always keep in the back of your mind – the lender does not want your property, and would rather resolve the situation instead of proceeding with a foreclosure. It is our job to present your short sale request in a way that is a win for you and a win for your lender.
Please contact us today for a FREE Short Sale Pre-Qualification by completing the form to the left or calling our office today.
- Understand the California Foreclosure Process
Understand the California Foreclosure Process
By almost any measure a foreclosure is the single most damaging event to your credit, worse even than a bankruptcy!
A foreclosure on your personal credit report will negatively impact your ability to obtain consumer credit for years to come. The affects are far-reaching, including limiting your ability to obtain automotive loans and credit card accounts, rent a home or an apartment, or even pursue certain employment opportunities.
Foreclosure prevention alternatives are available … Regardless of your financial circumstances or lack of home equity!
It is the goal of Griffin Knights Realty Corp to assist you with resolving your mortgage delinquency BEFORE foreclosure proceedings actually commence.
- For homeowners experiencing a financial hardship and at risk of mortgage default or currently in mortgage default , it is well worth the time and effort to carefully assess your foreclosure prevention options with a licensed, qualified real estate professional, such as the staff at Griffin Knights Realty Corp.
- However, if you are well into the foreclosure process already, viable options for avoiding foreclosure are still available. Now more than ever, lenders are willing to grant you additional time to remedy your mortgage default if they feel they can avoid foreclosing on your property altogether.
- Hiring Foreclosure Consultants – Do Not Pay Upfront Fees!
- You do not need to pay professional service or consulting fees to get the help you need to resolve your delinquent mortgage.
- In many cases, you can work directly with your mortgage lender to determine what options are available to you to resolve your mortgage delinquency.
We provide every homeowner with a FREE CONSULTATION in order to fully assess their current financial situation and most appropriate foreclosure prevention alternatives.
Please contact us today for a FREE Short Sale Pre-Qualification.