When will I qualify for a mortgage after a short sale or foreclosure?

Many clients who have gone through a short sale or foreclosure after 2007 are now asking me the question, “When will I qualify for a mortgage?” Housing is once again affordable and people want to take advantage of rock bottom deals. Prices in Phoenix, Arizona are hovering around the bottom. You can see from this chart that there haven’t been any drastic plunges or spikes over the past 9-12 months as shown in previous years. Now is the time to buy a house and become a homeowner once again. Now is the time to relocate, invest in a winter home, buy a retirement home, and invest in rental properties and fix-n-flips.


Another reason people are asking if they qualify to purchase a home again is because the FHA loan limits are said to be dropping significantly October 1, 2011. That means the buying power in the 3.5% down payment price range is much lower. In Maricopa County Arizona, the loan limit is currently $346,250. As of October 1st, it will be $271,050. That’s a decrease of $75,200 in buying power!

Others questioning, “When will I qualify for a mortgage?” are homeowners who elected to do a strategic default because the equity is so upside down. These homeowners are hundreds of thousands upside down in a property and are well aware that the value will never rebound in their lifetime to what they originally paid, so they cut their losses short. They are now looking to invest in properties. Interest rates are low, prices are at bottom and there are several opportunities to fix up a foreclosed house and flip it – or buy and hold it to take advantage of the booming rental market.

Finally, the answer to the question: When will I qualify for a mortgage after a short sale or foreclosure?

The Waiting Period to Qualify for a Home Mortgage after a Short Sale, Foreclosure or Bankruptcy

Call Kelli Grant to set up your custom web portal of MLS listings that match the property criteria, location and price range you’re interested in researching. You’ll receive notification emails up to once a day when there are price changes or new listings to see. 

Kelli Grant specializes in short sales, pre-foreclosure options such as the HAFA program, and strategic default options in the cities of Phoenix, Scottsdale, Cave Creek, Anthem, Glendale, and Peoria. Kelli Grant is the neighborhood specialist for Sonoran Foothills and Tramonto. If you need to speak to a reputable, reliable real estate attorney or CPA about the legal and tax consequences of a short sale or strategic default, contact Kelli Grant.

Kelli Grant, Personal Realtor® “Moving People Through Inspiration and Good Deeds

Call or Text 602-799-5420

 

 

When will I qualify for a mortgage after a short sale or foreclosure?

AUGUST 2011 – PHOENIX, ARIZONA’S HOUSING NUMBERS:

October 10th, 2011

PHOENIX, ARIZONA’S AUGUST HOUSING NUMBERS:

This summer was a record summer for Single Family Residence leases. There were 6,892 single family leases signed compared to 5,664 in the summer of 2010. The numbers reflect the increasing amount of potential homeowners that can not buy due to foreclosures or short sales on their credit. 

Hopefully something is done to lower the amount of time needed to elapse to qualify for a new loan after a foreclosure or short sale. There are a very large number of possible home owners that  have these on their records due to the large drop in home prices.  If the credit requirements do not change, we will continue to see Arizona residents in leases that would typically own a home.

Even though leases are up,   sold inventory continues to post impressive numbers. 8,817 sales were recorded in Maricopa County in August of 2011. This compared to 7,358 for August of 2010. Median home prices are still slightly down compared to this time last year.

Overall, August was a great month for the Arizona housing industry. The more sales we have, the more the industry is turning over the vast amounts of REO and short sale homes on the market. These need to sell and we need to move to a more traditional market for the prices to rise again.

August 2011, Phoenix, Arizona Housing Numbers

ARIZONA HOUSING STATISTICS – BREAKING RECORDS!!

ARIZONA HOUSING  STATISTICS  :  BREAKING RECORDS!!

June was a record month for Arizona housing.  10,868 home sales occurred in June of 2011, surpassing the previous record of 10,252 units sold in June of 2005.

June was also a record month for home leases of Single Family Residences.  2,280 new leases were executed last month, beating the previous record of 2,002 leases in July of 2008.

Typically home sales and leases go in the opposite direction, but with all the short sales and foreclosures occurring – there are a lot of people changing residences. 

Arizona short sales also set a record, contributing to 2,734 sold units – up 33% from May.

We are still very much in a market fueled by investors.  41% of Single Family Residences sales were purchased in cash.  29% with conforming loans, 24% with FHA loans, 4% with VA loans, and 2% with others.

Lastly, the median home price in Arizona increased in June to 111,000 from 109,000 in May. 

(Arizona Housing statistics – breaking records – from Reggie Green @ Crossline Capital)

Licensed in Arizona, California and Colorado.

MORTGAGE RATES BACK TO LOWEST LEVELS OF THE YEAR – 6/27/11

MORTGAGE RATES BACK TO LOWEST LEVELS OF THE YEAR:  The bond market closed the week 56 bps higher – pushing rates back to the lowest levels of the year.  This ended 2.5 weeks of the bond market going down, pressuring rates higher.

30 year fixed rates are now back to 4.375% with a portion of a point.  20 year fixed loans are back to 4.25%.  5/1 ARMS are down to 2.875%.

We are now in the last week of the FED purchasing mortgage backed securities program – QEII.  The market will now determine interest rates without the FED manipulating demand.

6/20/11 – Mortgage Rates Rise for 2nd straight week / The Foreclosure Statistics

MORTGAGE RATES RISE FOR 2nd STRAIGHT WEEK:  The Bond market finished slightly down on the week – ending 6 bps lower.  This pushed rates slightly higher on the week.  You can still get a 4.375% on a 30 year fixed rate, but it will cost over a point.  4.49% is the par rate paying less than one point.

Overall, there is some pressure on mortgage rates right now.  The Feds Quantitative Easing measures are about to end, which could push rates a bit higher.  Overall, I don’t see rates going much higher or much lower from where they are right now for the foreseeable future. 

 

THE FORECLOSURE NUMBERS:   According to the US Foreclosure Market Report, foreclosure activity has decreased for the 8th straight month.

There are 3 foreclosure activities they consider in their report.  Notice of Default is when the mortgage company notifies the customer that they are in violation of their contract and they plan on foreclosing unless payments are brought back up to speed.  This can be given out after 3 months of late payments.  Foreclosures scheduled is when a home is scheduled to be taken back by the bank.  REO is when the bank takes back the home and it becomes part of the banks inventory.

From April to May:

Notice of Default rates went down by 7%

Foreclosures Scheduled went up by 3%

REOs went down by 4% 

Although the foreclosure activity has decreased, the results can be misleading.  Many lenders are delaying foreclosure proceedings for various reasons associated with their own process and procedures as well as market considerations in the area where the homes are being foreclosed in.  If they keep pumping more REOs into the market when their current inventory is high, it will push down the values of their existing inventory.

Also, even though the inventory of homes in the foreclosure process has decreased steadily over the past 6 months, the inventory of REOs is increasing.  This is because the amount of REOs being added to the market is outpacing the amount of REOs sold.  This points to a still struggling housing market where the demand is not on par with the supply. 

The states with the highest foreclosure rates in order are Nevada, Arizona, California, Michigan and Georgia. 

6/6/2011 – MORTGAGE PRICING CONTINUES TO DROP

MORTGAGE PRICING CONTINUES TO DROP:  Mortgage rates / pricing went down for the 6th time in 7 weeks.  The bond market closed 50 points up last week, lowering pricing on most loan options by approximately .4 pts in cost to get the loan.

Though pricing is down, most of the par rates are still the same, just a bit cheaper to get in closing costs. 

Be cautious in waiting too long right now.  The Fed is discontinuing their mortgage backed securities program this month.  By the FED not pumping money into keeping interest rates low, we could see a rise in rates at the end of June.  I would lock in pricing if you are satisfied with a rate.

5/16 – 30 YEAR FIXED DOWN TO 4.5% , IS NOW A GOOD TIME TO BUY A NEW HOME?

MORTGAGE RATES LOWER FOR THE FOURTH STRAIGHT WEEK:  Rates are smoking right now.  30 Year fixed rates have dropped to 4.5% – typically costing approximately 1 point to get.  20 year fixed rates dropped to 4.25%.  15 year fixed rates dropped to 3.75%.  You can get a low closing cost 10 year fixed loan at 3.375% right now!!

Rates have improved for 4 straight weeks.  Be cautious in floating a rate.  Rates won’t go one way or the other for too long, and typically when they reverse we get some pretty substantial pull back.  Rates have now improved for 4 straight weeks – they will get some pull back soon. 

IS NOW THE TIME TO BUY A NEW HOME?:  In most markets, we are seeing that it is cheaper to own than to rent.  Rates are low and home values are low.  Freddie Mac reported this week that home prices nationally are down 2.8% in 2011 and they expect an increase in new home sales of 5% for 2011.

There are two reasons that most people are not buying a new home that have the ability and want to buy a new home.

1.)  Buyers don’t know that they can qualify for a new loan.  These potential customers probably have had some credit issues in the past and are unsure about their qualification prospects.  Keep in mind that qualifying for a new loan is relatively easy right now.  You can do a new purchase loan with a 580 Fico score and only put down 3.5% of the purchase value.  Just because you have had a foreclosure or short sale does not mean you can not qualify for a new loan – you only have to wait 2 to 3 years before you can buy again. 

Call me or call a loan officer you trust.  Check it out – you may be able to qualify and having one person pull your credit does not dramatically lower your scores like some people think. 

2.)  Buyers are afraid to buy because they don’t think the market has hit the bottom.  This is a legitimate concern.  Some markets are probably not at the bottom, but I think most can agree that we are past the rapidly depreciating phase.  One thing to keep in mind is that rates are still very low.  If they go up (which they eventually will – and already have from last year), you could see a higher payment on a cheaper home.

For example – You buy a 250,000 home, put 20% down and do a new loan at a 4.5% 30 year fixed rate.   Your PI payment would be $1,013.37.

Now let’s say you decided to wait and that same house a year later is now only 230,000.  You get a better deal, but rates have risen to 5.5%.  You put 20% down, do a new loan for 184,000 at a 5.5% 30 year fixed rate.  Your new PI payment is $1,044.73. 

So even though you have bought a cheaper home, you will pay 11,422 more over 30 years because rates are higher. 

This is really a big deal because some people think rates this low will last forever and they won’t.  And when they do go up, they can go up quickly.  In November 2010, rates went up by .75% is less than 4 weeks. 

Values are low, rates are great.  Right now is a great time to buy a new home!!

5-9 – MORTGAGE RATES KEEP GOING DOWN!!

MORTGAGE RATES LOWER FOR THE THIRD STRAIGHT WEEK:  In a repeat of last week, the bond market finished over 80 points higher – again pushing pricing / rates lower and lower.  Now is a great time to look into a new loan as we are seeing the lowest rates since early December 2010.

30 Year Fixed Par rates dropped to 4.625% and they are not far from 4.5%.  15 year fixed rates down to 3.875%.  5/1 ARMS are still at 3.125%.  If you want a fixed rate in the low 3% – maybe consider a 10 year fixed where that rate is available.

SHORT SALE VS. FORECLOSURE:  It is no secret that many homes across the country are upside down – meaning an owner owes more than what the home is worth.  There are some loan programs that will allow you to loan up to 105% of the value of your home, but many owners are much farther upside down than that.  With loan modifications hard to qualify for and usually not including reduction of principal – many home owners are forced to consider a short sale or foreclosure.

A short sale is selling the house for less than you owe.  The home owner comes to an agreement with their existing lender to accept a purchase contract for less than what is owed.  The good thing about a short sale is a home owner does not have to sign the agreement unless they are happy with the terms – the most common concern that homeowners have is that the debt is forgiven and that the bank can not come after them after the purchase is completed.  This is typically included in all short sale agreements. 

A short sale is a good way for a homeowner to move on from a home that has lost so much equity that they may never gain it back.  Many homeowners are $200,000 and $300,000 upside down and don’t want to stake their whole financial future on home values coming back.  A short sale is a good way for the bank to get a fair market value on the home without having to go through the costs and process of a foreclosure. 

A foreclosure is when a homeowner does not make the payments (because they can’t or because they choose not to).  Eventually the bank will seize the home and put it up for auction. 

Every person has a different view on whether short sales or foreclosures are right or socially responsible, but this does not change the fact that they will continue to happen and are a huge part of the housing market today.  Please let me know if you would like to talk to myself or a realtor in your area about the possibility of looking into a short sale.

CREDIT AND LENDING DIFFERENCES WITH A SHORT SALE AND FORECLOSURE:  Short sales and foreclosures have different consequences when a homeowner eventually wants to buy again.

FHA and conforming loans are the 2 most popular loan products on the market today.

If a customer goes into a short sale – they can not purchase again for 2 years with an FHA loan and 3 years with a conforming loan.

If a customer goes into a foreclosure – they can putchase again for 3 years with an FHA loan and 5 years with a conforming loan.

Both a short sale and foreclosure are considered public records on your credit report.  Overall, it is easier to purchase again quicker by going through a short sale versus a foreclosure. 

Right now the MORTGAGE DEBT RELIEF ACT allows homeowners to sell or foreclose on their primary residence without being taxed on the loss.  After 2012, a consumer will get a 1099 for the loss and must pay income taxes on it.

MY FREE SMART PHONE APP:  Go to WWW.WORKINGBUSINESSCARD.COM/DOWNLOAD.PHP on your smart phone.  Use my activation code 4802065577 (also my phone number).  This is compatible with I-phones, Blackberry, and Droids.  The app is completely free and gives you the ability to always have current mortgage rates right on your phone.  The application also has a mortgage calculator and prequalification tool for new purchase loans.  You must download from smart phone. 

 

RATES IMPROVE / IRS TO BEGIN TAXING ON SHORT SALES / FORECLOSURES.

MORTGAGE RATES FALL:  The bond market dropped 66 bps last week – marking a good week for lowering interest rates.  A lot of this is spurred by bad news in the economy / Japan.  It’s unfortunate, but when these things happen – the stock market typically goes down and mortgage rates get better.  The par rate on a 30 year fixed loan dropped to 4.875%.  5/1 ARMs back down to 3.25%.  15 year fixed loans down to 4.25%.

MORTGAGE RATE ADVERTISEMENTS:  I get asked this all the time – why are the rates you quote higher than other advertisements I see.  First, I quote par rates – the lowest rate you can get without paying discount fees to get the rate.  A lot of companies/individuals quote low on the rate so you will call them – they forget to mention that the rate they quote will involve a ton of closing costs.

Keep in mind when getting a quote – I can get you any rate that you want.  Lower rates are more expensive.  I try to quote rates with reasonable closing costs as that is what most customers want. 

IRS ENDING TAX BREAKS FOR SHORT SALES / FORECLOSURES IN 2012:  Congress enacted the Mortgage Forgiveness Debt Relief Act in 2007 that says the IRS will not tax foreclosure/short sale losses on primary residence homes until 2012.  For example if you owed $300,000 on your home and you short sold it for $200,000 – you would be sent a 1099 for the $100,000 that you would have to pay income taxes on.  This was temporarily suspended until 2012. 

The end is coming soon and you will be paying taxes on these losses.  I would never recommend foreclosure/short sale unless it is absolutely necessary, but if you are planning on doing one of these – I would do it now. 

Here is a good CNN article on when the IRS can tax you: http://money.cnn.com/2011/04/15/real_estate/taxes_mortgage_debt/index.htm