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All the San Jose (Zip 95131) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!
Short sales, in most cases, are one of the most economical solutions for all parties involved when a borrower can no longer afford their home. The bank typically incurs a smaller financial loss than would result from an ultimate foreclosure or continued delinquency on the mortgage payments. Borrowers may be able to soften the overall damage to their credit, and potentially settle future deficiency judgments. The big question on hand is…….What is life like after a short sale??
If you’re married and your spouse has recently had a short sale, you may still be able to purchase a home.
For the majority of married couples, their homes are purchased together using joint credit, income and assets. This article will address the following situations; the spouse purchased a home before the couple was married in his/her name, or the spouse purchased a home, qualified on his/her own qualifications and the other spouse disclaimed their interest in the property.
Let’s take a look at an example of what a typical scenario might look like for a typical borrower.
Mr. Smith bought a home in 2002. He was forced to do a short sale in 2008 because he lost his job and could only find employment that paid 50 percent of his previous income. When Mr. Smith purchased his home, he was able to qualify on his own and Mrs. Smith was not included on the loan. Mrs. Smith signed a disclaimer deed at the closing. Mrs. Smith has since graduated from medical school and returned to the workforce. Mr. Smith and Mrs. Smith would like to purchase a new home together. Unfortunately, Mr. Smith’s credit will not allow him to be part of the loan due to the short sale. Even if Mr. Smith’s credit score has rebounded from the effects of the short sale, Mr. Smith still must wait 2-3 years before he can buy using most traditional financing.
Mrs. Smith can qualify for a home on her own even though Mr. Smith had a short sale less than 2 years ago, provided she meets the standard qualification standards. Mrs. Smith would like to purchase the home with a FHA loan. In community property states, such as California, Mrs. Smith can still purchase the home even though the lender will review Mr. Smith’s credit history. However, any additional debts which appear on Mr. Smith’s credit report will have to be included in her qualifying ratios. As long as she can qualify on her income alone, she will be able to purchase a home. Mr. Smith will have to sign a disclaimer deed, relinquishing all of his rights to the property.
Please note: This article was written per California State laws and other states may differ. Please consult your mortgage consultant to discuss the laws and regulations applicable to your state.
All the San Jose (Zip 95130) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!
All the San Jose (Zip 95129) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!
All the San Jose (Zip 95128) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!!
All the San Jose (Zip 95127) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!!
There are many benefits to a Short Sale versus a Foreclosure for a San Jose homeowner, but there also many drawbacks to a short sale that need to be considered before deciding on the best course of action. A short sale is a great option for San Jose home owners who need to sell their home and owe more than their property is worth, but a short sale is not for everybody.
Benefits of a Short Sale
- A short sale will not drop the FICO score as much as a foreclosure. It is estimated a foreclosure will decrease a FICO score by as much as 250 points. The estimated decreased for a short sale is 150 points.
- The seller will be able to more quickly turn around and purchase another home after a short sale. Fannie Mae announced that effective July 1, 2010, short sellers can purchase a home with a Fannie Mae loan at 80% loan to value only two years after the short sale, and at 90% only four years after the short sale. With extenuating circumstances, Fannie Mae will allow a purchase at 90% loan to value only 2 years after the short sale. FHA requires a three year wait after a short sale, but will lender to 96.5% loan to value
- A short sale preserves some dignity for the seller. The seller will not have a “Notice of Trustee Sale” posted on their home while they still live in the neighborhood.
- Working out a short sale may allow the seller to avoid bankruptcy. It is important to work with someone with experience with short sales who knows how to negotiate with the lender (or lenders if there is subordinate debt as well) for Full Satisfaction of all debts.
Drawbacks of a Short Sale
- Short sales are not exactly “quick”, although this can vary depending on the lender or lenders being paid off. Waiting for the banks to respond can be a very frustrating process.
- There is no guaranty the bank will accept an offer. Last second maneuvers by the bank are not out of the norm. More frustration.
- The bank will want to see income and asset documentation from the seller to verify there is a true reason for the short sale. If the seller has significant assets, the bank may go after those assets or prevent the short sale from going through.
Figuring our whether a short sale is the best solution will take research. When a San Jose home owner finds themselves in a difficult situation, whether it be because of a job less, decrease in pay, or illness, combined with a drop in property value and even worse, an increase in mortgage payments, it is important to gather as much knowledge as possible. Ask me for a referral to local San Jose real estate expert who offer guidance in how to deal with the many options. The home owner should consult with their trusted attorney, accountant, real estate agent, and loan officer. Consider all options carefully, but most importantly, don’t “do nothing”.
Related Post - Foreclosure vs. Short Sale : What you need to know to make an informed decision
All the San Jose (Zip 95126) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!
CNBC and Bankrate.com just reported that home loan rates are at their all time lows. Yes, all time lows! This is great news for anyone who has yet to refinance to take advantage of the lowest rates ever recorded, or to purchase that new home or investment property more affordably than ever before.
Both 30 Year and 15 Year Fixed Rates clipped down to their lowest levels. All this is incredible as just months ago, many experts had anticipated that rates would be well above 5% this summer and on their way to 6% by year end.
Last month, NBC reported that nearly 50% of all people with a 30 Year Fixed rate had rates higher than 5.75% - do you know where your interest rate is at currently? It’s worth a look, and a call to me to help check it out!
Plus – in most parts of the country, home values as reported by both the National Association of Realtors and the S&P Case-Shiller Indices are higher than last year. If you were unable to refinance last year, the combination of your current home value and historic interest rates may provide you a greater opportunity to save money than ever before.
Finally, even if your home has lost value from when your loan was originated, you may still be able to refinance. There are some special programs available that might allow you to refinance without private mortgage insurance, even if your loan will now exceed 80% of the present value.
Don’t miss this chance to save money. Even if you have already taken advantage of the historic rates that have been offered, don’t miss this chance to help your family and friends. Call me today and we can discuss what options exist for you.
Time waits for no one…and when rates rise, they will rise quickly. Call me at 408.615.0655 to take advantage of these special rates or complete our rate quote form on the sidebar.
Whether you should do a short sale or let the home go to foreclosure depends on several factors. While for some homeowners, it is easier to throw up your hands and let the bank take your home, that might not be the wisest thing to do.
Short Sale Benefits
Here are a few benefits for doing a short sale that may not have occurred to you:
- You may sleep better at night knowing who is buying your home.
- You will spare yourself the social stigma of the “F” word, foreclosure.
- Contrary to popular belief, you can be current on your payments and still effect a short sale.
- Your home sale will be handled like any other home sale.
Buying Again After a Short Sale
Conventional loan guidelines may allow you to buy another home within 2 years. The wait for an FHA Loan is 3 years.
Buying Again After a Foreclosure
With certain restrictions, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years.
If you are an investor and do not occupy the home, the wait to buy with a conventional loan is 7 years.
Affects on Credit After a Short Sale
How a Short Sale is reported can be negotiated with the lender. Options are Paid As Agreed, or Paid Settlement.
If it is reported as a paid settlement, it can make a credit score drop by 75-100 points and the item can be reported for 7 ½ years from the date of first delinquency that led to settlement.
Affects on Credit After a Foreclosure
A Foreclosure can be reported as a Foreclosure or Repossession. Foreclosures and Repossessions can be reported for 7 ½ years from the date of first delinquency that led to foreclosure. A Foreclosure will make a credit score drop immediately by 100-150 points in addition to points already lost due to delinquent payments.
If a Deficiency Judgment is filed in connection with a Foreclosure, the score may drop up to additional 100+ points.
Deficiency Judgments After a Short Sale
Judgments are often negotiated between the seller and the short sale bank. In some cases, such as California, if the home is your personal residence and was financed through purchase money, there is no deficiency judgement.
Deficiency Judgments After a Foreclosure
Banks are unwilling to negotiate deficiency judgments with the homeowner after a foreclosure. In California, for example, according to the California Association of REALTORS, a deficiency judgment may be filed regarding a hard-money loan if the lender forecloses under a judicial foreclosure versus a trustee sale or if the second loan is a hard money loan and the sale takes place as a trustee’s sale.
Length of Time to Move After a Short Sale
If you’ve had a foreclosure notice filed, you may be able to postpone that action while the bank considers your short sale. The wait for short sale approval can be from 2 to 3 months, or longer.
Length of Time to Move After a Foreclosure
Unless prior arrangements have been made, the bank may want you to immediately vacate the property and can commence eviction proceedings.
I always recommend that you obtain legal and tax advice before making a decision between a short sale or a foreclosure. I can also refer you to some real estate agents who are short-sale experts who can help you explore all the options available to you.
Fannie Mae and Freddie Mac are making the following changes to interest-only and 3/1 and 5/1 ARM Loan Programs. These changes go into effect immediately.
Interest Only Product Changes
Interest only transactions are no longer available for Cash-out refinances, Investment properties and 2 to 4 unit properties.
Interest only loans are still eligible on following transactions:
• 1-unit purchase and rate/term transactions
• Primary residences or second homes with a:
- Maximum LTV and CLTV of 70%
-Minimum credit score of 720
-The borrower must have minimum reserves of 24 months
3/1 and 5/1 ARM Qualification Changes
Fannie Mae is changing the qualifying rate for 3/1 and 5/1 Arms to limit the impact of potential payment shock for ARM borrowers. The borrower’s now must qualify using the greater of the note rate plus 2%, or the fully indexed rate. Lets understand this using an example:
Say you are buying a $500,000 single family house with 20% down payment and your start rate on a 5/1 ARM is 4%. Per earlier guidelines, you could have qualified for this loan with an income of $5800/month assuming you had no other debts. But with the new guideline, you need to qualify at 6% (start rate +2%). So now the income that you need to qualify for the same loan would be $6900/month. Thats a jump of $1100/month or ~19%.
As you can see from the example above, qualifying for ARM loans is going to be more difficult moving forward. If you would like to understand what loan program is more suitable for your situation, contact me for a complimentary consultation or fill out our rate quote form.
All the San Jose (Zip 95125) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!
All the San Jose (Zip 95124) Single Family and Condominium Real Estate market trend charts on this page are “live.” Want more details? Subscribe to my Real-Time San Jose Market Report by completing the form on the sidebar or by visiting San Jose Real Estate Trends page. It’s all about what’s going on right now and it’s free!
