Short sales are a key component when speaking about the current real estate market these days, along with foreclosures. Short sales though are a relatively new animal for the real estate world. What exactly is a short sale? Put simply it is the process by which a seller is able to sell their home short of the amount of money they owe on it.
For example we have a house who’s market value (the amount a buyer will pay for the house) is $120,000 and a mortgage of $150,000. The seller is under water on their mortgage but still needs to sell. There is a process a seller can do to get the bank to reduce the amount owed so they can sell their home. It takes contacting the bank and jumping through all the hoops they will require including a full application and BPO (broker price opinion, where a Realtor is hired by the bank to determine the market value of the property) and can take months to get done or can be completed quickly.
Short sales are better for your credit than a foreclosure. People who loan money like to see that a seller has done everything they can to live up to the agreement they signed. It means there is a much greater chance they will fulfill the contract next time. Some experts say a short sale will only affect your credit for a couple of years versus a foreclosure staying on your credit 7 years or more.
Although frequently given a bad rap by real estate agents for their frequent failed closings (short sales are a challenge to close), short sales are a great opportunity for people to get out from under a mortgage they can not pay for. In some states banks can come after sellers for the difference in price and what is owed on the mortgage. Most banks do not though.
A really good book to check out is "Survive & Thrive In A Recession" by Herb Strather. It covers many different ways to negotiate with the banks to facilitate a short sale. This developer author and teacher have put together an excellent accumulation of tips and tricks from his many years in real estate. It is the secrets of the pros revealed kind of book and well worth the investment. You can find more info on Strather at his website www.stratheracademy.com.
Sellers can complete a short sale on their own it is very difficult and takes a large amount of time on the phone. You must call the bank a minimum of three times a week to check on the status of the short sale. If you are at the point of missing payments and fail to do this they can schedule a date to sell the property on the courthouse steps. By keeping in constant contact you are putting yourself at the top of the pile of paperwork that litters most bankers’ desks right now.
The best thing you can do is get some help from a qualified short sale specialist Realtor that will help walk you through the process. Remember you are NOT required to pay them that is the Bank’s responsibility. Make very sure they are experienced in closing short sales not just listing them. Many unscrupulous agents use unsuspecting short sale sellers to attract buyers and have no intention of actually getting the home sold. Ask for references and check them. Also it is a good idea to ask for a past client’s phone number so you can call and ask them how well this agent did. Closing a short sale is very doable and will leave your finances much better off it is also challenging and having the person in your corner will greatly help your success.
Friday, September 25, 2009
Thursday, August 6, 2009
Bad Credit No Money Down Mortgage
No down payment loans require little or no cash from the purchaser at the loan closing.
Though PMI (or private mortgage insurance) is normally mandatory on any loan with less than 20% equity in the home, some mortgage programs will allow you to lower pricey mortgage insurance.
Low down payment programs can be a fine idea for first time home buyers or those who would rather use the cash for other purposes.
The average down payment for a house 20 plus years ago was 20%. Today, it's normal for people to put as little as 4% down on their new home. Basically, a no down payment mortgage is a home loan for which you don't put any money down to buy your house. In post recession market, finding a no down payment mortgage could be hard unless you are a pro and/or eligible for a VA loan. VA loans usually don’t require a down payment. That being said, low down payment mortgages, like an FHA loan, tend to be very popular.
No down payment mortgages for vets and low down payment mortgages for bad credit are now a tend to be more ideal for both clients and lenders.
Bad Credit and No Down Payment Mortgage
A popular choice for homebuyers with bad credit is the "no down payment mortgage." Some FHA mortgages only requires a 3.5% down payment. And using PMI, you can often buy down your monthly mortgage insurance, guaranteeing a lower payment throughout the life of your home loan.
Is a No Money Down Mortgage Loan for you?
For some people, a no money down home loan may be the only way to buy a home. First-time home purchasers often have a hard time saving up for a 20 percent down payment, or they might consider using the money they have saved for other things like buying furniture or something.
By not investing a lot of money toward a down payment, you have the option of using your cash for other things such as paying off or consolidating debt to fix bad credit. It’s a smart financial move because mortgage interest is usually tax-deductible and rates are lower than most credit cards.
Don’t Pay Ridiculous Amounts for Private Mortgage Insurance
There are some down falls to a low down payment mortgage, one of which is paying PMI, or private mortgage insurance. Anyone who doesn’t put up 20% plus of the home's value usually ends up paying PMI. That being said, there are ways to lower this expense:
Though PMI is usually a requirement on any loan with less that 20% equity in the home, you may find mortgage programs that allow you to lower your PMI. The way it works is that you pay a portion of your PMI upfront. This can significantly lower your monthly PMI for as long as you want to keep your loan in place. It’s somewhat the same as when people lower their mortgage by paying for points. The point is you can do the same with your private mortgage insurance.
Often times borrowers can eliminate PMI once they've reached a set level of equity in their home. This amount varies depending on the lender, but it is often around twenty percent. As of July 29, 1999, it’s actually required by law for lenders to cancel private mortgage insurance once a borrower has reached 22 percent equity. That said, it is common practice for a homeowner to request PMI be removed once they’ve reached the twenty percent mark. If the homeowner doesn’t have bad credit, this is a very real possibility.
If all else fails, there are other ways to get your 20% down payment, or “No Money Down Refinance.” For example, some loans allow for down payments to come from sources such as monetary gifts given from relatives or even employers. You might be able to draw from a trust fund or a retirement account, or use money you inherited. You should know that pulling money from some sources such as 401k’s may cause you to be penalized for making withdrawals.
It's important to consider all these factors when shopping for no down payment refinance or low down payment mortgages. Shop around, as there are many lenders out there to choose from.
Though PMI (or private mortgage insurance) is normally mandatory on any loan with less than 20% equity in the home, some mortgage programs will allow you to lower pricey mortgage insurance.
Low down payment programs can be a fine idea for first time home buyers or those who would rather use the cash for other purposes.
The average down payment for a house 20 plus years ago was 20%. Today, it's normal for people to put as little as 4% down on their new home. Basically, a no down payment mortgage is a home loan for which you don't put any money down to buy your house. In post recession market, finding a no down payment mortgage could be hard unless you are a pro and/or eligible for a VA loan. VA loans usually don’t require a down payment. That being said, low down payment mortgages, like an FHA loan, tend to be very popular.
No down payment mortgages for vets and low down payment mortgages for bad credit are now a tend to be more ideal for both clients and lenders.
Bad Credit and No Down Payment Mortgage
A popular choice for homebuyers with bad credit is the "no down payment mortgage." Some FHA mortgages only requires a 3.5% down payment. And using PMI, you can often buy down your monthly mortgage insurance, guaranteeing a lower payment throughout the life of your home loan.
Is a No Money Down Mortgage Loan for you?
For some people, a no money down home loan may be the only way to buy a home. First-time home purchasers often have a hard time saving up for a 20 percent down payment, or they might consider using the money they have saved for other things like buying furniture or something.
By not investing a lot of money toward a down payment, you have the option of using your cash for other things such as paying off or consolidating debt to fix bad credit. It’s a smart financial move because mortgage interest is usually tax-deductible and rates are lower than most credit cards.
Don’t Pay Ridiculous Amounts for Private Mortgage Insurance
There are some down falls to a low down payment mortgage, one of which is paying PMI, or private mortgage insurance. Anyone who doesn’t put up 20% plus of the home's value usually ends up paying PMI. That being said, there are ways to lower this expense:
Though PMI is usually a requirement on any loan with less that 20% equity in the home, you may find mortgage programs that allow you to lower your PMI. The way it works is that you pay a portion of your PMI upfront. This can significantly lower your monthly PMI for as long as you want to keep your loan in place. It’s somewhat the same as when people lower their mortgage by paying for points. The point is you can do the same with your private mortgage insurance.
Often times borrowers can eliminate PMI once they've reached a set level of equity in their home. This amount varies depending on the lender, but it is often around twenty percent. As of July 29, 1999, it’s actually required by law for lenders to cancel private mortgage insurance once a borrower has reached 22 percent equity. That said, it is common practice for a homeowner to request PMI be removed once they’ve reached the twenty percent mark. If the homeowner doesn’t have bad credit, this is a very real possibility.
If all else fails, there are other ways to get your 20% down payment, or “No Money Down Refinance.” For example, some loans allow for down payments to come from sources such as monetary gifts given from relatives or even employers. You might be able to draw from a trust fund or a retirement account, or use money you inherited. You should know that pulling money from some sources such as 401k’s may cause you to be penalized for making withdrawals.
It's important to consider all these factors when shopping for no down payment refinance or low down payment mortgages. Shop around, as there are many lenders out there to choose from.
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