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Strategies from a Top Short Sale Buyer Agent and a Lender

Jim Duffy — Sun, 25 Jul 2010 20:16:57 +0000

Short sales are all over the news these days, just behind the reports on the record number of foreclosures. And, a lot of homeowners are either severely under water on their mortgages - owing more than the home will sell for and do not have the funds to make up the difference – or are in economic woes themselves due to job loss or any number of other of life’s difficulties.

Yet, they do not want to just walk away, or turn in the keys. Simple honor prevents these homeowners from just walking away; so they turn to the relatively new phenomenon of the short sale. That is, the lender agrees to take less for the home than the mortgage balance on that home, as payment in full.

And that creates a potentially terrific buying opportunity to get a great deal on a home, and help out a homeowner in need.

Having been the lender on quite a number of short sale purchases over the past couple of years, I can offer some advice for a buyer who is considering putting an offer on a home that is offered as a short sale. And the very first piece of advice I would give is to choose your Realtor well. Sure, that goes for all real estate transactions. But with a short sale, it is vitally important.

You may not realize, but most real estate agents do not like to work with short sales. I sat down with one who does, Joshua Jarvis. In fact, Joshua successfully navigates the short sale process for buyers more than nearly any other agent in north metro Atlanta. And he sure had a lot of advice.

So, between the two of us, here are the top strategies to do when buying a short sale property:

Short sales take time and require patience: So make sure you choose an agent who is experienced in short sales and can therefore manage expectations along the long road.
Most banks will pay a maximum of 3% toward the seller closing costs; HUD will only pay 1% however. Plan accordingly for cash to close.
Most banks will only entertain a short sale on a property when the homeowner is 30 to 60 days behind on their mortgage.
Given that, it generally takes a minimum of 90 days from offer to closing. Again, patience will help this transaction succeed.
The due diligence time for inspections, etc, begins once the lender approves the short sale. No sense shelling out for inspectors until the lender gives the go-ahead.
And, possibly most important – get your loan approved early. There is nothing worse for all parties than going through the grueling process of getting a short sale approved, only to find that the buyer does not qualify for the mortgage. Don’t get pre-approved. Get fully approved, early.

So, with the right lender and the right agent, venture out with confidence and put an offer on a short sale property. With patience, you really could get the deal…of a lifetime.

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Atlanta FHA Loans A Little More Expensive

Jim Duffy — Sun, 11 Apr 2010 18:06:27 +0000

As of April 5 2010, the great financing that FHA offers became just a little more expensive. Still great financing, though, rest assured.

The Up Front Mortgage Insurance premium, or Up Front MIP, is the part of FHA’s Mortgage Insurance that is, in nearly every case, rolled into the loan amount. The other part of the mortgage insurance is paid monthly as part of the mortgage payment. That Up Front MIP went from 1.75% of the loan amount to 2.25%.

To you, that means that if you were buying a home and financing a $200,000 loan, then the Up Front MIP was $3500, for a loan amount of 203,500.

Now, at 2.25%, the same $200,000 base loan amount will carry an Up Front MIP of $4500, for a total loan amount of $204,500. An addition of $1000 in fees that go to HUD on your 30 year fixed rate Atlanta FHA loan.

It is still a good deal, in that it takes much less down payment, and the monthly Mortgage Insurance is much less than a comparable conventional loan.

USDA Funding Set to Expire

Jim Duffy — Wed, 10 Mar 2010 19:05:08 +0000

If you are in the market for a Georgia USDA Rural Housing home purchase, then you will want to act fast.

Lenders just received this notice today:

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.” This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita. Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

We apologize for any inconvenience this may cause you.

So, if you are in the market for a home that qualifies for rural housing, then now’s the time

FHA Mortgages and Short Sales

Jim Duffy — Fri, 18 Dec 2009 15:23:37 +0000

A couple days ago a “Mortgagee Letter” finally came out from HUD clarifying how they would look at Atlanta FHA loan applications where a previous short sale was involved.

If the short sale was simply to take advantage of market conditions and get out of a house that was underwater, in order to purchase a similar or superior property at a reduced price, then the borrower is NOT eligible for an FHA insured loan. My understanding of the definition of that rule is that if the new property is within the same commuting distance as the previous property, then that is considered ineligible for FHA.

Therefore, the argument could be made that if there was a short sale, and then a transfer to the Atlanta market, then a new FHA loan could be made.

Yet that, only if the borrower was current on the mortgage for the previous 12 months prior to the short sale. If the borrower was in default at the time of the short sale, then HUD is viewing that the same as a foreclosure, and the borrower will need to wait 3 years from the date of the sale to qualify for FHA financing.

In summary, then, a short sale is fine to qualify for a new FHA loan so long as the borrower was current on the mortgage and all other installment debt for the previous 12 months, AND, they either relocate to another city or downsize in house.

Any other combination, and it looks like HUD will want any metro Atlanta buyers to wait 3 years to re-qualify for a new FHA loan.

Big Changes Coming for Atlanta FHA Loans

Jim Duffy — Fri, 11 Dec 2009 01:40:47 +0000

This is a post first put here. I thought it so important for you to know that I have reposted it.

Reports that FHA may be the next ’sub-prime’ implosion have been swirling for some time now. The reason is that an FHA loan is simply a mortgage that is insured by HUD against default, to protect the lender, and the reserve insurance funds are dwindling. And if HUD were to run out of money to insure these loans, then FHA lending would die.

That scenario is unlikely to happen, which was attested to by HUD Secretary Shaun Donovan yesterday before the House Committee on Financial Services. However, what it does mean is changes, and possibly BIG changes are in the works for FHA lenders.

Nothing has been decided yet, but HUD has floated out there several changes that are likely to be implemented in the coming few months. An overview of the changes that affect Georgia FHA loans the most are:

Increased minimum FICO scores for home buyers: Currently, HUD does not mandate a minimum credit score to qualify for FHA financing. However, nearly all lenders have instituted their own minimums, ranging from 620 to 660. HUD has not indicated what the minimum will be; but my guess is to look for it to be in the 620-640 range.
Seller concessions will be lowered: Currently the sellers can contribute up to 6% of the sales price to pay closing costs, pre-paids and any points to buy down the interest rate. That will likely be lowered to 3% maximum. Now, 3% covers the closing costs and pre-paids in the vast majority of circumstances – but this will stop sellers from ’sweetening’ the deal by offering to pay for a permanently lowered interest rate by offering to pay points to buy the rate down – a practice that has been catching on somewhat, and is very attractive to a potential buyer.
Cash required from the buyer will increase: This one is unclear at present what form it will take. Currently an FHA buyer needs to bring a down payment of at least 3.5% of the purchase price. There has been talk of raising the minimum required down payment to 5%. However, it is not clear if this will be the outcome or not. What is clear, is HUD wants its FHA buyers to have more “skin in the game”.
MIP Premiums to increase: Conventional loans with lower down payments are insured by private companies with the PMI payment. Similarly, FHA loans have an Up Front Mortgage Insurance Premium, which is what replenishes HUD’s insurance pool so that they can insure against default, and of course the monthly MIP payment. Currently on an FHA purchase HUD collects 1.75% of the loan amount as the Up Front MIP, and .55% of the loan amount annually, as part of the monthly mortgage payment. Not sure how much, but it looks likely that the Up Front MIP amount will increase. And from my reading of the Secretary’s comments, the monthly premium amount may remain the same.

Changes are coming fast and furious. So, on top of all the other reasons you have to buy a home financed with an FHA mortgage now, i.e. historically low mortgage rates, a tax credit for most buyers and historically low housing prices, now you have yet another reason to act now and buy. FHA financing will become more costly and more difficult to qualify for in the near future.

Buying a Bank Owned Property

Jim Duffy — Fri, 09 Oct 2009 21:31:01 +0000

This is a fun, just a little extreme…but not too far off the mark, either.

Atlanta’s On Sale!

Jim Duffy — Mon, 05 Oct 2009 12:42:08 +0000

I saw this post on Drudge this morning, one solitary post surrounded by a peppering of headlines about the World Bank running out of money and California being the first state to fail, etc.

All the other posts could be pointing to the catalysts for inflation coming our way, as I have written about here before. Whether that comes to pass or not, only time will tell. In the meantime, we are in one of the best buyers markets we have seen in a long, long time.

As noted in Ms. Beck’s article, especially big items - like cars and homes – are on sale right now. We have not seen the likes of this in decades.

Just one example among many that I could list: Today I have a buyer closing on a town home that they are buying for $66,000. It sold two years ago for $149,000, and is in move-in, very nice condition. That’s a 56% discount. Couple that with low FHA and conventional mortgage rates in Georgia, and if you have the means and income to buy, then the “Affordability Index” is the highest it’s been since that index began tracking, in 1970.

And I am seeing deals like that across every price point. A 30-60% discount is one I would jump on, especially when you can finance the home with an Atlanta FHA loan. Maybe you should, too?

Strategies from a Top Short Sale Buyer Agent and a Lender

Loans Serviced by Taylor, Bean & Whitaker: Your Loan Information

Jim Duffy — Tue, 11 Aug 2009 23:44:10 +0000

We, as you know, are a direct lender. We underwrite FHA and most other loans right in our office, and fund the new loans. But, we do not “service” loans, or keep the loan and collect the monthly payments from each borrower. We sell our loans to servicers.

Why is this important? Because we have sold a lot of loans to the mortgage servicer, Taylor, Bean & Whitaker; especially our FHA loans. TBW was the 3rd largest FHA mortgage servicer in the nation. And, as you may have heard in the news, TBW closed their doors abruptly last Wednesday. And, a lot of clients are wondering where they should be sending their monthly mortgage payment now.

HUD just came out with a fairly informative information page for loans that were serviced by TBW. You can find it HERE. The entire FHA portfolio has been transferred to Bank of America.

And, if I helped you in orginating your home loan, then feel free to call me and I will do what I can to help you sort out any questions that you have.

Atlanta FHA Loan Highpoints

Jim Duffy — Mon, 10 Aug 2009 18:47:28 +0000

An FHA loan for a buyer around Atlanta, especially a first time home buyer, is one of the very best loans right now. That’s because an FHA loan is one of the easiest to qualify for, covers all properties, and is not dependant on outside, third-party factors.

FHA loans for Atlanta area buyers are easy to qualify for: With a minimum 620 credit score – at present – and no collections or significant late pays in the past year, the credit will be approved. And, unlike conventional loans, there are no discount points for lower credit scores that are charged. And, contrary to popular belief, the property qualifies pretty much the same as with a conventional appraisal. Just enough verifiable income for the borrower needs to be there.
An FHA loan in metro Atlanta covers all properties: Okay, at least all residential properties that are being purchased to be a Primary residence. Properties in a “declining market” cannot be financed to the maximum Loan to Value (LTV). FHA does not have the restriction. And, Rural Housing loans are excellent, and offer 100% financing, but are only available to, well, rural homes.
Atlanta FHA loans are not dependant on outside, third-party restrictions: For example, if a borrower getting a conventional loan, as opposed to an FHA loan, puts less than 20% down payment, then they will need Private Mortgage Insurance (PMI). The MI companies currently count metro Atlanta as a “declining market”, so even though conventional loans will lend up to 95% of the purchase price of the home, MI companies will only insure the loans up to 90% LTV. So, that’s all we can lend. Similarly, I can get an approval for a prospective home-owner with a 670 score – but MI companies will not issue PMI for any borrower with that low a credit score.

So, if you are looking at buying a home in Atlanta, then look to FHA. And, if you want home-buyer training, then sign up for this training.

Atlanta’s Million Dollar Mortgage Challenge

Jim Duffy — Sat, 11 Jul 2009 15:49:50 +0000

Teaming with some real estate professionals from around Atlanta, we are launching a big project: Atlanta’s Million Dollar Mortgage Challenge. The goal – to help 125 first time home buyers into their first home by November 30, each receiving the $8000 tax federal tax credit available to first time buyers only.

The math on that is simple: 125 first time buyers, purchasing at least an $80K home, by November 30, 2009, each receiving the $8,000 tax credit. Total: $1,000,000 in the hands of new homeowners.

Are you in? We will have a series of FREE seminars where you will receive all the information that you need on qualifying and receiving the $8000 federal tax credit, how to buy a home, what to look for and the pitfalls of buying your first home, and the in’s and out’s of financing that first home – with FHA loans, Rural housing mortgage or any special first time buyer loans.

The dates will be announced soon; and you can be amoung the first to sign up and know about this by visiting the official Atlanta Million Dollar Challenge site. Bookmark it today, and check back early next week for the dates and times of the Free seminars. Then, be ready to claim your $8000 federal tax credit.

(Oh, and you may also claim some of the great sponsor prizes, when you attend the event, too!)