It should be the perfect moment for first-time buyers—the missing link in the housing recovery—to enter the market. Houses are selling, prices are rising, foreclosure rates are down, and interest rates have maintained historically low levels—yet they have not jumped in. With its recent moves, the Obama administration is trying to entice them. Continue reading
While impending fiscal cuts at the federal level will likely put a damper on economic growth in the first half of this year, home-price growth and an increase in homebuilding suggest housing is “on a sustained growth path,” according to a monthly economic outlook released by Fannie Mae’s Economic & Strategic Research Group.
The lowest number of homes for sale since December 1994, a rising share of short sales compared to foreclosures, and fewer distressed properties overall have helped push up home prices from a bottom reached in early 2012, Fannie Mae said.
“One of the key developments for the housing market last year was the general consensus that home prices, on a national basis, bottomed earlier in the year and continued to build momentum, exhibiting robust year-over-year gains unseen since the housing boom,” the report said. Continue reading
An summary update (by CAR.org) on the mortgage relief plan by the federal government, covering an article by The Mercury News:
In his State of the Union Address, President Obama laid out a plan to help responsible borrowers and support a housing market recovery. Details of that plan were released yesterday. However, funding for the proposed program must be approved by Congress, lowering the possibility that it will be implemented quickly. Making sense of the story:
- Operated by the Federal Housing Administration, the plan would allow underwater homeowners to refinance into cheaper federally insured loans. Borrowers with good credit who are current on their loan payments are eligible.
- The measure also streamlines the process of refinancing an underwater mortgage, eliminating the need for an appraisal or submitting a new tax return.
- To qualify, borrowers must be current on their mortgage, have a minimum credit score of 580, and must be refinancing a loan on a single-family owner-occupied principal residence.
- Lenders only need to confirm that the borrower is employed. Loans that are more than 140 percent of the home value probably would not qualify until banks wrote down part of the balance.
- Congress must approve $5 billion to $10 billion in funding, leading housing experts to praise the plan’s objectives with skepticism of it passing this year.
Read the full story from The Mercury News here: “More mortgage relief from the White House – but congressional ‘ok’ doubtful.”
There are some additional hurdles for homeowners who have gone through a foreclosure, short sale or bankruptcy, but a little patience and some financial hard work will go a long way.
Buying a home is a challenging goal for most hopeful homeowners. But for those who have experienced a bankruptcy, foreclosure or short sale, the hurdles are even higher.
Still, it’s not impossible to buy a home after financial difficulties, says Dan Keller, a mortgage banker with Hometown Lending in Everett, Wash. In fact, Keller says, people who have cleaned up their credit and are otherwise qualified to get a mortgage can buy a home as soon as they have outlasted a prescribed waiting period after the bankruptcy, foreclosure or short sale.
Wait a while
The waiting period can last one to seven years, says Kirk Chivas, chief operating officer at First Commerce Financial in Wixom, Mich. The one-year requirement applies to buyers who complete a Chapter 13 bankruptcy, have a spotless subsequent credit history and want to get a new loan insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veterans Affairs. The seven-year requirement applies to buyers who experienced a foreclosure and want to get a new conventional loan that can be sold to Fannie Mae or Freddie Mac.
In between are a number of two-, three- and four-year timelines based on similar criteria and other factors such as whether the buyer’s previous mortgage was current at the time of a short sale or the size of the buyer’s new down payment as a percentage of the home’s purchase price.
Generally speaking, the waiting periods after a bankruptcy tend to be more black and white while the waits after a foreclosure or short sale have more gray areas, Keller says. And in some cases, a waiting period can be waived or shortened if the buyer’s bankruptcy, foreclosure or short sale was due to extenuating circumstances or a hardship beyond his control.
Technically, it is possible for a buyer whose prior loan wasn’t in default at the time of a short sale to get a new FHA-insured loan with no waiting period, Chivas says. But he adds that he’s never encountered anyone in that situation.
Buyers must have very clean or perfect credit histories before they can buy homes after bankruptcy, foreclosure or short sale. A slip-up as small as one late credit card payment could disqualify a post-bankruptcy buyer from some loan programs, even if the waiting period has been completed, Keller says.
“Bankruptcy is a serious word,” he says. “If you do it, it’s a get-out-jail-free card. But once you get out of bankruptcy, you need to be flawless in your credit. Don’t even drop a gum wrapper.
Credit dings can be difficult to sort out for buyers who experienced a loan modification or short sale, in part because, as Chivas says, there’s “no consistency” in how lenders report those events to the credit bureaus. Buyers should review their credit reports and correct any errors or clarify the circumstances of adverse items.
Stable employment can be a plus, too, Keller says, noting that some loan programs are more lenient than others. “If there was a gap,” he says, “it needs to be explained.”
Consult a loan pro
Given these complexities, buyers are advised to consult a loan officer or mortgage broker early on for advice that applies to their situation.
“They may think they’re fine, but if they’re not talking to a professional, their hopes can get dashed or crushed,” Chivas says. “That’s why you want to speak to someone as soon as you start dreaming it up in your head” that you want to buy a home after a bankruptcy, foreclosure or short sale.
This article is by RealEstate.MSN.com, and is viewable here: “Getting a mortgage after foreclosure.”