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Short Sales and FHA’s and VA’s, Oh My!

January 20, 2014

This past Saturday’s show covered many different topics that our listeners had multiple questions on. The first one was short sales. A listener asked to give a definition for short sales. Wendy Haisley from Markve & Zweifel defined short sales as when someone has to leave a property due to income loss, inability to make the payments, wanting to sell or needing to sell due to divorce, relocation, etc., and they owe more than what the property is worth and cannot afford to pay off the mortgages in full. In order to help yourself, you accept an offer on the property subject to the lender approval and submit the offers to the lenders. The lender does a review that is necessary under their investor guidelines and decides if they are going to allow you to sell that property ‘short’, paying them less than what you owe and then waiving the balance so that you can move on without owing anything on your previous mortgages.

After hearing this definition, you might find yourself in a similar situation where you need to have a short sale. People do not always view short sales as the best option to choose from, but that’s because many people do not seek out the professional advice from their lender, realtor, or attorney. These professionals can help you get back on your feet without prematurely moving due to fear of getting kicked out of your house. Markve & Zweifel is a great place to seek advice in these cases. Check out their website here!

There were a few questions asked about requirements for loans. The first question asked whether or not you can be approved for a VA loan less than two years after a short sale if credit scores, income, debt, etc. are all good. Nick Kelvie from First Option Mortgage brought up the fact that there are many requirements for approval of VA loans including about a three year wait depending on your credit score. The answer to that question, unfortunately is no, you cannot be approved for a VA loan less than two years after a short sale. Lenders do require a minimum credit score of at least 620 for approval of a VA loan. There are also other income sources used to qualify for a VA loan including Retirement Income, Social Security Income, Child Support, Alimony and Separate Maintenance, BAH, BAS and Disability Income. To find out more about qualifying for a VA loan, check out this website.

Another listener asked about how to be approved for an FHA loan. A few things to be aware of before applying for an FHA loan is that you must be an occupant in the residence that you are applying for and it must be your primary residence. If your home exceeds the amount of the maximum mortgage amount for your area you would need to put additional funds down to hit the maximum loan limits. While there is a minimum credit score you need for an FHA loan, you will also need to be able to prove that you are capable of paying bills on time. You should also be able to show lenders a consistent work history for two years before applying for the loan and show that you will have three years of expected work after the loan approval. One other thing to work on is reducing your debt-to-income ratio below by paying off credit cards or loans. There is so much more information about FHA, loans but a good way to start is checking out these frequently asked questions here.