Let's say that, three years ago, you bought a house for $200,000. You put down $50,000 and borrowed $150,000. Today, similar homes in your neighborhood are selling for $100,000. You feel like a chump. So why not just dump your old house in a short-sale, then buy another? Loan rates are low, especially FHA loans. Sounds tempting?
Before you decide, you better be aware of the latest HUD guidelines.
Starting right now, if you apply for a new FHA mortgage, you will be turned down if you sold your principal residence via a short-sale to “take advantage of declining market conditions,” or to “purchase a similar or superior property at a reduced price within a reasonable commuting distance” of the house you sold using a short-sale.
OK - so what if you keep your present home and rent it out? That way, you can use the rental income to qualify for a new loan, snap up that great short-sale deal down the street, and move in.
Don't count on it.
FHA guidelines will allow the lender to include the income from the rental, but only under very strict guidelines.
Basically, the lender may only include this rental income when the loan-to-value ratio on the vacated home is 75% or less. So if your house is worth $100,000, but the loan is $150,000, then the rental income will not be included when qualifying you for your new purchase loan.
If you are moving because of a job change, the rules may be more lenient. But you had better check with your lender to see if you still will qualify under these new guidelines.
2 comments:
Fantastic! I needed this kind of information, especially on real estate short sale related topics.
So glad you found this useful. The regs are changing quickly, but I'll try to keep everyone up-to-date.
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