For those would-be homeowners who want to purchase a new home today, but had a recent short sale in their history, there is hope.
The typical waiting period on a short sale is at least two years, i.e., a borrower must wait at least two years from the recording of the short sale to become eligible for conventional financing. However, if the circumstances around the short sale were extenuating in nature, it is actually possible to buy TODAY and finance up to 70% of the purchase. Beyond the 30+% down payment, the borrower needs to have an otherwise perfect credit history, strong reserves and a low debt-to-income ratio.
And what about other waiting periods associated with other past credit blemishes like foreclosure or bankruptcy? Check out the following grid for more detail on the typical waiting periods..:
For more details on the above or other tidbits that may help you better prepare you or your clients for a property purchase or sale, please contact your favorite mortgage advisor.
No doubt, the overall market locally has been on a tear for the last year or so, but try and tell that to the contingency of sellers whose property sits idle in the current market. What can they do beyond the conventional marketing tactics? One way may be to advertise a high-leverage program similar to the one we recently wrote about in our Pigs are Flying article. Or maybe try advertising the lowest, plausible monthly cost of the property. And how do you do that without suggesting that would-be buyers pay cash? How about: 1. Increasing the amortization period of the loan to 40 years instead of 30 years, 2. Proposing an interest-only payment, 3. Using an adjustable rate mortgage (ARM) program that has a low rate, 4. Increase the down payment from 20% to 30%, and 5. If you’re really bold, suggest the after-tax cash flow assuming a high marginal tax rate (with the proviso that one seek professional tax advice!).
So let’s compare the difference in monthly cost using the features above versus a standard 30-year fixed mortgage:
As you can see, the 5/1 ARM is $2,515 LESS per month than the 30-year fixed, which translates into a cash-flow savings of over $30,000 per year and over $150,000 over the next five years..! If nothing else, displaying such options will likely attract more buyers and get the property sold sooner than later.
The above is just one strategy that any qualified mortgage professional should have available to assist sellers in selling their home. Who would have thought that a mortgage lender could help sellers ;)!
Note: Rates are subject to daily fluctuation and highest borrower qualification.