There is a lot of misinformation going around about what the impact of a Short Sale is on your credit and whether you can get a new mortgage after short selling a home. Below are the current Guidelines for FHA, and Fannie Mae.
FHA has recently changed their rule so that if a short sale occurred and all of the borrowers payments were made on time (no late payments) then they may be eligible for a new mortgage as long as the short sale was due to extenuating circumstances and not to simply take advantage of market conditions (see below). As you can imagine, this may be difficult to demonstrate. Otherwise, if any payments were made late or you cannot demonstrate extenuating circumstances, then it is a 3 year period before new FHA financing can be considered.
Fannie Mae policy is pretty straight forward – It is a minimum of 2 years to re-establish credit after a short sale.
It is very difficult to predict how a short sale will affect an individual’s credit score because there are so many different factors involved; How good was the credit to begin with? How many house payments were made late? Did they pay all of their other bills on time? Etc, The short sale will most likely be reported as a settled account paid for less than the amount owed and will have a dramatic impact on credit score even under the best of circumstances.

Here is the excerpt straight from FHA:
Borrowers are not eligible for a new FHA- insured mortgage if they pursued a short sale agreement on his or her principal residence simply to
•take advantage of declining market conditions, and
• purchase at a reduced price a similar or superior property within a reasonable commuting distance.

Reference: For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g

Borrowers Current at the time of Short Sale
Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage
•All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
• All installment debt payments for the same time period were also made within the month due.

Borrowers in Default at the time of Short Sale
Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.
Note: Borrowers who sold their property under FHA’s pre-foreclosure sale program are not eligible for a new FHA-insured mortgage from the date that FHA paid the claim associated with the pre-foreclosure sale.

This is Fannie Mae’s Guideline:
Preforeclosure Sale
A two-year period is required to re-establish credit, measured from the completion date.

Written by:
Ken Mascia
248.644.1200
kmascia@primecapitalmortgage.com

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Credit scoring models are a mystery that boggles the mind. There is no way to know exactly how specific changes to your credit report will impact your credit score. We do know the factors that go into calculating the score – 1) Your payment histories 2) Number of accounts that have balances. 3) Proportion of balances to credit limit. 4) Length of time accounts have been opened. 5) Credit inquiries. 6) Collection Accounts and Public Records. You can read more about this in the articles I wrote entitled How to Get a Great Credit Score Part 1 and Part 2. The scoring models are updated occasionally and the changes cause different issues to play a bigger or smaller role in your score. Continue reading ‘How to Destroy Your Credit Score in One Easy Step!’ »

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Dr. Douglas H. Hardy, chairman of SKBK Sotheby's International Realty in Birmingham, who is showing homes to Fiat executives, says they are awed by the size of appliances in U.S. kitchens, such as this one in Bloomfield Village. He adds: "The size of the refrigerator blew their minds."

Three months after Italy’s Fiat took a controlling stake in Auburn Hills-based Chrysler, new Chief Executive Officer Sergio Marchionne has a condo in Birmingham and more Italian executives are moving into the area.

“Everyone is genuinely excited that the Italians are coming,” said Ed Nakfoor, a Birmingham-based retail consultant. “Everyone thinks they are these chic people.”

Dr. Douglas H. Hardy, chairman of SKBK Sotheby’s International Realty in Birmingham, whose firm is handling Fiat’s relocation’s, said Birmingham, Bloomfield Hills and Bloomfield Township have been popular locations. Potential buyers are looking at homes starting at $200,000.

“We are working with two to three a month,” said Hardy. “They are sending their top people so far. They are establishing a camp first.”

Still, most Fiat executives moving here are leasing, despite low home prices. That’s in contrast to the 1998 union of Daimler-Benz and Chrysler. German employees settled here in greater numbers and tended to purchase homes, said Carolyn Bowen-Keating, a relocation specialist for Coldwell Banker Weir Manuel in Birmingham.
Continue reading ‘Italians get taste of U.S. Kitchens, stores wow Fiat’s execs’ »

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The following is a statement by National Association of Realtors® President Charles McMillan:

“The Federal Housing Administration is playing a crucial role in providing mortgage financing to the housing market, as mortgage and banking systems have faced collapse. While FHA’s capital reserve ratio has declined, that is not surprising for an agency dealing in housing finance in today’s market, and there is no sign that a taxpayer bail-out will be required. FHA stands in contrast to entities in the private sector, including Fannie Mae, Freddie Mac and many large banks that have needed tens of billions of dollars in federal funds.
Continue reading ‘FHA Taking Steps to Ensure Taxpayer Money during Housing Crisis’ »

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Realogy Corporation, a global provider of real estate and relocation services, announced its support of a bi-partisan Senate bill (S. 1678) recently introduced that would create a six-month extension of the $8,000 federal tax credit for first-time homebuyers and move the current expiration date forward to June 1, 2010.

“This is an important next step for maintaining positive momentum toward a recovery in the housing markets and the overall U.S. economy,” said Realogy President & CEO Richard A. Smith, who also serves as chair of the Business Roundtable’s Housing Working Group. “While we applaud this effort and support passage of this prudent and necessary legislation, we also want to make it clear that we will continue to work with Congress to broaden the scope of the credit.

“Specifically, Realogy supports expanding the existing first-time homebuyer tax credit to all homebuyers of a principal residence, increasing the size of the tax credit, and eliminating the existing income eligibility caps, all of which we believe are critical to the ‘move-up’ or repeat buyers who we expect will drive the essential second phase of a housing recovery.
Continue reading ‘Realogy Supports Bill To Extend First Time Homebuyer Tax Credit to June 1st’ »

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In February the government amended and improved the first time homebuyer tax credit. Just to refresh your memory:

1) First time homebuyers will receive a federal tax credit of 10% of the cost of the home with a maximum credit of $8,000. You get the credit when you file your tax return for the 2009 tax year. It is possible to file an amended return for 2008 and get the credit sooner though.

2) A first time buyer is defined as anyone who has not owned a home in the past 3 years (including spouse)

3) Property purchased must be used as a principal residence (no second homes or investment properties)

4) Tax credit is refundable or will offset existing tax liability. Whatever your normal tax refund is you would get that plus the full amount of the tax credit.

5) The credit starts to phase out for individuals making more than $75,000 per year ($150,000 for a joint return)T

6) There is no repayment of the tax credit. However, if the home is sold in the first 3 years the entire amount of the credit is recaptured on sale of the property

7) Tax credit is available for qualified buyers through November 30th of 2009

The main message here is that you have to find a home and close on it prior to November 30th to qualify for the tax credit!

There has simply never been a better time to be a homebuyer. Homes are selling at great prices, interest rates are very low and if you qualify for the tax credit the government will give you up to $8,000 in cash simply to get out there and buy a house. What are you waiting for? Time is running out!

Written by:
Ken Mascia
248.644.1200
kmascia@primecapitalmortgage.com

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Few words sting like the ones that inform you that you’re being laid off — especially today, with jobs so hard to come by. If you’re a homeowner, the blow of a job loss can be even worse. In households with more than one wage earner, halving the monthly income can severely stretch a budget. And in households where there’s one breadwinner, having zero income can be devastating. A rainy day fund helps, but it’s important to craft a plan early about how you’re going to get through the rough patch. More people are facing this nightmare today: While the volume of subprime mortgages headed to foreclosure is falling, the volume of prime, fixed-rate mortgages defaulting is on the rise, according to statistics from the Mortgage Bankers Association. The MBA’s chief economist said that’s a result of rising unemployment.

“If you don’t have the prescribed three to six months income in the bank (now eight to 12 months due to how long it takes to replace that job), you’re really in deep trouble with some troubling decisions to make,” said Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling, in an e-mail. The NFCC is a national, nonprofit credit-counseling network. “We always advise people to pay their living expenses in full (this includes the house payment), followed by any secured debt (usually the car payment), and then the creditors. This will keep a roof over your head, food on the table, utilities paid, medicine in the cabinet, the kids at day care, etc. Once the money runs out, no one beneath that line gets paid. However, this assumes that there’s either some savings to fall back on or another income source,” she said.
Continue reading ‘Lose Your Job, Keep Your Home – Ask for Help Before it’s Too Late’ »

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