The CA Mortgage Guy would like to inform you of an update from FHA regarding how it is responding to short sales and short pay offs has been published.

• Short sale – a previously owned property was sold for less than what was owed.
• Short pay off – there was a principal write down of indebtedness that cannot be refinanced into a new mortgage.

Here is an overview of the Top 5 things you should know about these changes:

1. These changes are effective immediately.
2. Borrowers are NOT eligible for new FHA financing if they pursued a short sale on his or her principal residence simply to take advantage of the declining market in their area in order to acquire a similar or better property near their current residence within a reasonable commuting distance.
3. Borrowers ARE eligible for new FHA financing if they had 0×30 (no 30 day lates) on their mortgage and other installment debts in the past 12 months AND the proceeds from the short sale served as payment in full.
4. Borrowers whose mortgage was in default OR pre-foreclosure status at the time of the short sale are NOT eligible for FHA financing for 3 years from the date of the pre-foreclosure sale, unless they qualify for an exception.  Lenders MAY approve an exception based upon A) The default was due to circumstances beyond the borrower’s control, such as a death of primary wage earner, long-term un-insured illness etc. AND B) The review of the credit report indicates satisfactory credit history prior to the circumstances beyond the borrower’s control which caused the default.
5. On an FHA refinance, borrowers ARE eligible if the current lender chooses to write down the mortgage due to declining market values AND/OR a reduction in income.

Stay tuned for more FHA and conventional loan updates from the CA Mortgage Guy!

Tax Credit Expires 11/30/09 – Don’t Get Left Behind

Unless you have either been under a rock for the past 12 months or you never work with first time home buyers (FTHBs), you are no doubt aware the clock is ticking on the IRS tax credit for FTHBs. My purpose here is to give you some additional information on what you can do to buy your new house, sell your current house, move listings, motivate buyers, and more importantly close deals.  To check current LA Home Mortgage rates or CA Mortgage rates, contact me today – they are at or near historic lows still!

General Points to Consider – Buyer and Seller
The expiration date of the tax credit is November 30, 2009. Close December 1, as of now, and any qualifying buyer will not receive the tax credit. With the 30th falling on the Monday following Thanksgiving, where possible work towards a closing date of November 24th. This will provide some cushion if anything pops up in the closing process that could delay a closing.

Recent legislation mandates that if the Annual Percentage Rate or APR changes outside acceptable tolerances from the initial application of as little as .125%, some documentation needs to be re-disclosed and time needs to pass (waiting period) before the closing can occur. Items that can impact APR can include a change in interest rate or fees required to close. If a buyer delays locking the application and interest rates increase during the loan process, this could delay the closing. This is just one reason to plan accordingly and schedule an earlier closing date than the last possible day.

Protect yourself with extended closing dates of 45-60 days. Expectations are high that more FTHBs will be going under contract in the next month. Interest rates have fallen to levels not seen since May – contact me today to find out the most current mortgage rate california. The result is that many lenders’ pipelines will be swelling with people seeking to take advantage of lower rates and the tax credit. Get under contract soon and plan accordingly to allow for any processing delays that could result.

Seller Points to Consider
Many FTHBs are motivated to purchase but may lack the necessary funds to close or may fall short in qualifying income. One way to assist with either or both situations and make the property more attractive is to promote that the seller will pay to reduce the borrower’s interest rate and/or closing costs. In many cases, this will not only cost the seller less than a price reduction but also lowers the buyer’s required qualifying income by reducing their monthly payments and brings additional prospects to consider the house.

Most FTHBs today are choosing to obtain loans that are guaranteed by the FHA. What is FHA?  The Federal Housing Administration is a division of HUD.  In the case of FHA loans, the seller can pay up to 6% of the sales price or appraised value towards closing costs and rate reduction.

Consider approaching all sellers today with homes that would appeal to FTHBs and get them to commit to paying closing costs and/or reducing the buyer’s interest rate. This has often worked for builders in generating sales and it can work for sellers, too with more of an impact than having to reduce price!

Sellers who do not move homes before the end of November may find themselves waiting until the spring buying season kicks in to find their buyer. Make sure sellers know they need to promote their property now or risk waiting months while potentially seeing their property’s value decline in the process.

Buyer Points to Consider
In the same light as just mentioned, many buyers may feel they lack the funds required to close. When buyers are interested in a property, encourage them to submit an offer with the concessions needed to get the mortgage approved. You may just find that the seller is willing to negotiate.

Get all potential buyers pre-approved!  As the time to close will be at a premium during the months of October and November, any work that can be done to expedite the application process will be golden. Buyers should be prepared by not to waiting until they have a home under contract. Any documentation submitted today for pre-approval should be good through the end of November. Also, with a pre-approval in hand, both you and they will know exactly what they can qualify and shop for and an offer submitted with a pre-approval letter is the one that gets looked at 1st!

If you want to help with the application process and prevent the need to possibly re-disclose loan documents, encourage your buyers to lock their interest rate early in the loan process. This will be helpful for all parties and help the buyer focus on closing and providing any additional documentation that may be needed.

Some Questions on Who May Qualify
I have received many questions regarding who may and who may not qualify for the FTHB tax credit. I have a list of FAQs on examples I have either dealt with or read about so contact me today to receive this FREE list. As always, I encourage anyone with specific questions to consult with an accountant for final clarification.

Let’s Move Some Property or Buy That New Home!
If you have any questions from either a seller or buyer side as to what someone can or can not offer where financing is concerned, how LA home mortgage rates are looking or just a general question like “what is fha”, pick up the phone and call me or contact me via email or the contact tab above. I’m here to help YOU!

Look forward to my next posting!