Tick Tock – How long do you have to wait after a foreclosure, bankruptcy, or short sale?

If you have filed bankruptcy, been foreclosed on or had a short sale you might feel like it will be an eternity until you are able to purchase a home again. That is not the case!

Below I have laid out the waiting periods by the type of loan you wish to use, NOT the type of loan you previously had.

Conventional

Foreclosure       7 years

3 years if there were acceptable extenuating circumstances and

borrower must have 10% down payment. Owner occupied only

Short Sale         7 years if borrower with less than 10% down payment

                        4 years if borrower with 10% down payment

                        2 years with 20% down payment

                        2 years with acceptable extenuating circumstances

Bankruptcy       4 years from discharge date

Chapter  7         2 years from discharge date with acceptable extenuating circumstances

Bankruptcy       4 years from dismissal date

Chapter 13        2 years discharge date

Conventional examples of acceptable extenuating circumstances (must be verified and documented): Nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.

FHA

Foreclosure         3 years

  Less than 2 years, not less than 12 months if there were acceptable

  extenuating circumstances

Short Sale            3 years

   No waiting period if borrower had no late payments on any

   mortgages or consumer debts within the 12 month period preceding

   the short sale and they are not taking advantage of declining market

   conditions

Bankruptcy          2 years from discharge date with re-established credit or no new

Chapter 7             credit obligations

                           Less than 2 years, but not less than 12 months from the date of

                           discharge if there were acceptable extenuating circumstances

Bankruptcy          1 year payout period under bankruptcy has elapsed and borrower’s

Chapter 13           payment performance has been satisfactory and all required  

                           payments made on time

FHA examples of acceptable extenuating circumstances (must be verified and documented): Serious illness or death of a wage earner. Divorce and the inability to sell a property due to a job transfer or relocation to another area does not qualify as an acceptable extenuating circumstance.

VA

Foreclosure         2 years

                          12-23 months if there were acceptable extenuating circumstances

Short Sale           2 years

                          No waiting period if borrower had no late payments on any

                          mortgages or consumer debts within the 12 month period preceding

                          the short sale and they are not taking advantage of declining market 

                          conditions

Bankruptcy         2 years from date of discharge

Chapter 7           12-23 months from date of discharge if credit re-established and paid

                          as agreed and was caused by acceptable extenuating circumstances

Bankruptcy         1 year payout period under bankruptcy has elapsed and borrower’s

Chapter 13          payment performance has been satisfactory and all required payments

                          made on time

VA examples of acceptable extenuating circumstances (must be verified and documented): Unemployment, prolonged strikes, medical bills not covered by insurance, etc. Divorce is not viewed as beyond control of the borrower and/or spouse.

If you have faced a bankruptcy, foreclosure or short sale, remember there is hope to becoming a homeowner again!

Contact your lender for more detailed guidelines.

Using Your VA Loan in a Competitive Market

In Solano county we have been experiencing situations where there are multiple offers on one piece of property. Our military service men and women are able to purchase homes without a down payment using their VA benefits, but typically a VA buyer is put at the bottom of the pile when there are multiple offers. 

So, how can a VA buyer compete with FHA, Conventional or cash offers? This post is a little lengthy so here is the bullet point version:

• Offer a reasonable price
• Pay your own closing costs
• Offer to pay for repairs
• Write a heartfelt letter
• Ask for a simple disclosure
• Have your agent present your offer in person

Obviously to be competitive you must offer a reasonable price. That means writing an offer that is not too low or too high for the area. Sometimes people fall in love with a home and are willing to offer well above market value. Most sellers have been informed that if the appraisal comes in lower than the price offered they will need to come to an alternative agreement, which typically results in a lower purchase price. Therefore, the seller will be more likely to accept an offer closer to market value that does not require them to pay closing costs, warranties, repairs, etc.

If you have some cash do not ask the seller to pay closing costs. Guidelines have recently changed allowing VA buyers to pay what are considered “VA mandatory” closing costs up to 1% of the purchase price if they are not paying an origination fee (which is usually sufficient for $200,000 purchase price). Make sure your real estate agent speaks to the seller agent about this. Some agents are unaware a VA buyer can pay these and will assume the seller needs to pay the VA mandatory closing costs.

State in your contract you will pay for repairs up to a specified dollar amount to satisfy VA requirements. Make sure you note all repairs must be approved by the buyer.

The less you ask the seller to pay for the better your chances!

Tug at some heart strings. Write a letter about wanting to raise your family in the home, how you grew up in the area, the kitchen reminds you of your grandma’s house, you have been moved all around the country and can finally settle down, pretty much whatever you can think of.  

You also have the choice to ask for one of two disclosures, the “Seller Property Questionnaire” or the “Supplemental Contractual and Statutory Disclosure.” The “Seller Property Questionnaire” is a four page disclosure the seller fills out covering in detail things such as neighborhood nuisances, water and mold issues, pets on property, repairs and alterations. The “Supplemental Contractual and Statutory Disclosure” is a more broad one page disclosure. I always recommend a buyer request the “Seller Property Questionnaire” so they can get as much information about the property as possible. If a buyer is desperate to obtain the property and feels it could increase their chances of getting their offer accepted if they request the shorter disclosure, it is an option.

The most effective way to get an offer accepted is to have your real estate agent personally present your offer to the seller. Your agent can clearly explain to the seller the advantages of choosing your offer and give them an idea of what the home would mean to you. This also shows the seller your agent is willing to put in the extra effort and will hopefully be easier to work with than other buyers’ agents.

Good Luck!

Fixing Up a Fixer Upper - With No Cash

With so many homes being foreclosed on, the amount of bank owned (REO) properties continues to grow. Although the prices are relatively low, unfortunately many times so is the condition of the home. If a homeowner cannot afford his or her mortgage payment do you think they would invest money in updating the kitchen, replacing carpets, or making various repairs?

Investors have been buying homes that need cosmetic updating and basic repairs, fixing them up and selling them for 30-40%  more than they paid for the home. For example, a home in Vacaville was purchased by an investor for $130,000 about 2 months ago and is selling for $200,000. This home has new paint, carpet, appliances, granite countertops, vanities, lighting fixtures, windows, and landscaping. I am by no means an expert on pricing for these various updates, but I can tell you there are not $70,000 worth of upgrades in the home.

The average buyer does not have the funds to pay for $15,000 to $35,000 worth of upgrades when they purchase a home, and most buyers looking for a home they can move into as quickly as possible.

There is a solution!

There is a program called the Streamline 203(K). This allows homebuyers to finance up to an additional $35,000 into their mortgage to make upgrades or improvements before they even move in. Paint, flooring, basic kitchen remodeling, appliances, roofs, and plumbing are all covered under the program. I was able to talk to a "203(K) Expert" and was amazed at how easy the process is for homebuyers. There are many ways to have the repairs or upgrades done but the easiest is to have a company that is approved by the program such as Home Depot or Lowe's do everything for you. You meet with the contractor and go over everything you want done and pick colors, materials, etc. Once escrow closes the company will go into the home and do the work you have agreed upon. Once everything is completed you get to move into a home that is even better than one of those investor flips because you got to pick everything out yourself. Also, depending on the details of your loan mortgage payments typically do not start until you have moved into the home.

The best part about this program is the homeowner only has one mortgage payment and at the end of the process has most likely built equity into their new home.

Contact your lender for more details about this program.