Buying again, 2 years after Short Sale – questions for you pros

[SD Realtor]

As you can see clearly it is more important for people to pass judgement then to understand what may be right for you. In the end if there is a finite probability of you walking for whatever reason then coming in with the smallest downpayment possible is how you mitigate that risk. I don’t need to post amortization tables for you to understand you will pay much more interest in the long run. I also doubt this will be the last home you ever buy so keep that in mind. You will probably also find that trying to argue what is best for may be lost on others and will simply lead to long long posts that try to meld you into doing something that is for your own good.

[bearishgurl]

[quote=SD Realtor]…You will probably also find that trying to argue what is best for may be lost on others and will simply lead to long long posts that try to meld you into doing something that is for your own good.[/quote]

SDR, I think I’ll take this as a compliment 😀

[patientrenter]

[quote=SellingMyHome]
……Why put 20% down? When I run the rent vs buy calculator at NYTimes, the higher deposit makes it better to rent, assuming a 6% or higher ROI, which long-term is doable.

Why not put the 3.5% down? The next house I buy will be my last, if nothing changes with jobs, health, etc. Aren’t interest rates so low now that it makes sense?

I know a lot of people here wish that folks never could have bought with zero or little down, as it allowed many people to walk away with no loss.

I’m really still a little (a lot in some of your eyes) clueless as to why a higher down payment is a better thing for me.[/quote]

Savers and taxpayers are paying for this ability to put down 3.5% instead of a minimum of 20%. This example shows that it’s not necessary to allow downpayments of less than 20%. We are simply allowing people to milk “the system”. For those of us who pay for the system, this is just theft, authorized by Congress, and executed by the Federal Reserve and Treasury.

[scaredyclassic]

Forget the moral crap. It’s better to have 20 perc down. We never wouldve gotten the bitching short sale we did if our offer didn’t come in withconv 20 perc offer. The monthly payment/ interest is much better. We couldn’t invest the diff and make more than the monthly savings.

It doesn’t matter about the evilness of the system

you’ll do better with 20 percent down, in general. Not always but generally.

In retrospect I wished we’d put 26 perc down to get out of the jumbo loan.
MHO.

[bearishgurl]

Fannie Mae guidelines on underwriting prior short sellers:

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1005.pdf

The OP here does not appear to meet the “extenuating circumstances” test.

B3-5.3-08, Extenuating Circumstances for Derogatory Credit (04/01/2009)

Introduction
This topic provides information on extenuating circumstances for derogatory credit information.

Extenuating Circumstances
Extenuating circumstances are 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.

If a borrower claims that derogatory information s the result of extenuating circumstances, the lender must substantiate the borrower’s claim. examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical reports or bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during, and after a loss of employment), etc.).

The lender must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on their financial obligations.

see pg 429 of: https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel063010.pdf

Fannie Mae guidelines on underwriting borrowers with prior foreclosure:

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2010/sel1008.pdf

FHA guidelines on underwriting prior short-sellers:

Mortgagee Letter 09-52, Continued
Summary – FHA Guidance on Short Sales

Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to
• take advantage of declining market conditions, and
• purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf

Any Piggs please feel free to post an update if these are not the latest and greatest … thank you!

[ctr70]

Bearishgirl, those guidelines are only if you want to get a short sale BEFORE the 3 yr waiting period after short sale for FHA, and BEFORE the 2 yr waiting after short sale for conventional 20% down.

It is pretty straightforward and easy to get a mortgage after a short sale, after a bankruptcy or foreclosure, IF you wait the time periods, you don’t even have to have a great reason or extenuating circumstance for it.

Also, VA only requires a 2 yr wait after a foreclosure and FHA only a 3 yr wait. And all three VA, FHA and conventional loans only 2 yr waits after Chap 7 BK’s. It’s pretty much a slam dunk you will get the loan after these time periods.

Believe me, people who dumped their properties to foreclosure in 2008 and having NO trouble getting back in the market with a 3.5% down FHA loan at 4% right now.

1. VA – 2r wait short sale, BK 7, foreclosure
2. FHA – 3 yrs wait short sale, foreclosure, 2 yr wait BK
3. Conventional – 2 yrs wait short sale (20% down), 2 yr wait BK 7, 7 year wait foreclosure

[bearishgurl]

[quote=ctr70]Bearishgirl, those guidelines are only if you want to get a short sale BEFORE the 3 yr waiting period after short sale for FHA, and BEFORE the 2 yr waiting after short sale for conventional 20% down.

It is pretty straightforward and easy to get a mortgage after a short sale, after a bankruptcy or foreclosure, IF you wait the time periods, you don’t even have to have a great reason or extenuating circumstance for it.

Also, VA only requires a 2 yr wait after a foreclosure and FHA only a 3 yr wait. And all three VA, FHA and conventional loans only 2 yr waits after Chap 7 BK’s. It’s pretty much a slam dunk you will get the loan after these time periods.

Believe me, people who dumped their properties to foreclosure in 2008 and having NO trouble getting back in the market with a 3.5% down FHA loan at 4% right now.

1. VA – 2r wait short sale, BK 7, foreclosure
2. FHA – 3 yrs wait short sale, foreclosure, 2 yr wait BK
3. Conventional – 2 yrs wait short sale (20% down), 2 yr wait BK 7, 7 year wait foreclosure[/quote]

Thank you, ctr70. The OP states he had a short sale in 2010 (abt 18 mos ago?) and currently has a FICO score in the “low 700’s.” He does not appear to meet any “extenuating circumstances” test.

Ball park (and excluding closing costs), what are the rates and terms he could currently expect for an 80% LTV fixed conventional mtg of $400K and a 97.5% LTV fixed FHA mtg of $482,500? Thanks for any help.

[SD Realtor]

Everyone can argue all they want. If the buyer has any thoughts of walking, then putting as little down as possible is the best bet. There really is no argument. If the buyer never intends to walk or is not going to sell in a short period of time then a larger downpayment is better. There is no argument that a larger downpayment is better for all possible outcomes.

As for the moral hazard…. come on now, quit kidding yourselves, we lost that quite awhile ago. Don’t jump on this guy for following the rules.

[ctr70]

[quote=bearishgurl]Thank you, ctr70. The OP states he had a short sale in 2010 (abt 18 mos ago?) and currently has a FICO score in the “low 700’s.” He does not appear to meet any “extenuating circumstances” test.

Ball park (and excluding closing costs), what are the rates and terms he could currently expect for an 80% LTV fixed conventional mtg of $400K and a 97.5% LTV fixed FHA mtg of $482,500? Thanks for any help.[/quote]

He would have to wait for 3 yrs after a short sale to go FHA, but you say he is only at 18 mos. In 6 mos he could try conventional 20% down, as they only require 2 yrs after short sale.

[ctr70]

[quote=SellingMyHome] So, we dumped it onto a bank that was the cause of the mess this country is in now. [/quote]

This quote is the prevailing mindset in the country right now, and is being heavily pushed by the media and some politicians. That; “it was not my fault, it was the damn bank that gave me a loan to buy a house”. “How dare that bank actually loan me money and expect me to pay it back!”. Yes we all know, some terrible loans were made that shouldn’t have been, and the banks have been rightfully blamed heavily for that. My issue is that it is AT LEAST 50/50 fault between the homeowners and lenders for the mess we are in. I could have bought at the peak with a $5,000/mo payment, but I didn’t b/c I knew I couldn’t afford it. I stayed living within my means and rented. Many financially prudent friends of mine did the same thing. No one forced anyone to buy a home. Many did it out of greed b/c they saw their neighbors house going up $100k a year and wanted a piece of that speculation. No one forced anyone to make stupid decisions like cashing out all their equity to buy the RV and the Hummer. But now it’s all the banks fault. I just personally feel the media and a lot of politicians are shifting the blame 100% off the homeowners, and it’s at a minimum a 50/50 blame.

[SellingMyHome]

I’m not blaming my bank personally, sorry if it read that way. I’m blaming the greed in Wsll Street that made the resulting problems in 2007…

Many people like me thought we were doing the smart thing, we didn’t plan on losing our house. Some people bought what they couldn’t ever afford, and that was wrong. It was the greedy bastards that bet our investments on us losing. Credit default swaps…

[Author]

Posts