Short Sale on the FHA Loan
One of the ways that you can avoid foreclosure is to engage in what is known as a short sale. A short sale is basically when you sell your home for less than what remains on the home mortgage loan. In many cases, mortgage lenders will take a loss in order to avoid an even bigger loss if the home is foreclosed on. This is also true when you have a FHA loan.
Over at Lenderama, Paul offers some insight into FHA short sales. This is very interesting stuff that you should probably know if you are planning to avoid foreclosure with a FHA loan short sale:
>>They removed the calculation that required the property to appraise for at least 63% of the indebtedness (this is helpful because many properties have dropped below 37% of the mortgage balance).
>>HUD used to accept 82% of the appraised value as their net - now it is 88% if it sells within 30-days marketing time, 86% if it sells in 60-days, and 84% after 60 days.
>>Prior to ML 2008-43, HUD would pay zero buyer closing costs on an FHA short sale, now they will pay 1% of buyer’s closing costs if the new buyer is obtaining FHA financing.
>>They’ve increased the amount allowable to discharge junior liens up to $2,500.
>>FHA allows the seller to walk away with up to a $1,000 check at closing
You can see that in some cases, the process has been made easier. This is important, since one of the cornerstones of economic stimulus is the attempt to forestall foreclosures and try to keep more losses from adding up. A short sale might be able to do this. Additionally, the incentives (some of buyer’s costs covered) to get additional FHA loans out there may also help the current situation.
However, as with many other programs, the ultimate success will depend on whether or not mortgage lenders are on board. You can see more tips on engaging in a successful short sale at RealEstateProArticles.com.
