If you are planning on buying a Florida short sale, take note of these new loan requirements for getting a mortgage. With the start of the new year, lenders have set in place new requirements for getting a mortgage loan.
Since the housing crisis was brought about by borrowing catastrophes, these new lender guidelines being implemented under The Consumer Financial Protection Bureau’s Qualified Mortgage (QM) are being put in place to avoid the housing meltdown from happening again.
Some of these requirements are as follows:
A maximum debt-to-income ratio of 43. This new rule will not allow for any circumstances to offset the DT like a big down payment or huge cash reserves. A borrower with a DTI over 43% will not qualify for a loan.
Ability to repay. Self-employed borrowers must prove they have sufficient cash flow to pay their loan. This can be challenging since most self-employed people’s income tend to fluctuate. These borrowers usually have cash reserves set aside to compensate for months where their income is low. Even with a huge cash reserve, self-employed individuals may still have a difficult time in getting a loan approved.
No-doc or low-doc loans not allowed. Lenders are required to submit and verify borrowers’ complete financial information
Lower fees. Origination fees should not go beyond 3% for a loan of more than $100,000.
No risky loans. No interest-only payments, no negative amortization payments where principal increases, and terms should not exceed 30 years.
Contact within 36 days of missed payments. Lenders should contact borrowers within 36 days of a missed payment. Lenders must also provide available payment options not later than 45 days after the due date.
Clearer monthly billing statements. Lenders must provide clear monthly statements indicating the amount of your payment that went to escrow and principal, balance owed, and service or transactional fees.
Early warning for ARM: Lenders must notify borrowers of increased rates 210-240 days before the next payment and follow up with an additional notice 60-120 days before the new payment is due.
The lender’s incentives in following these guidelines are huge. If mortgage loans fail to meet the QM, the lender can hold the loan instead of selling it to Fannie Mae or Freddie Mac.
The QM requirements may have lower loan limits for conventional conforming loans. The Federal Housing Finance Agency (which regulated Fannie Mae and Freddie Mac) will delay its normal adjustment of loan limits from 1 January 2013 to sometime later this year, after seeing what kind of impact the new QM guidelines will have on the housing industry. The current limits for most housing markets are $417,000 or as much as $625,000 in high-cost areas. These figures will change later this year.
Getting a smaller loan will be more difficult under the new QM requirements since origination fees will be limited to no more than 3% of the loan amount. This means lenders are less likely to offer smaller loans since they may not be able to recover their costs and make a profit with the smaller origination fees.
Florida short sale home buyers could expect to see these changes in the mortgage loan approval process this year and more changes later in the year.
It’s very easy for any real estate agent to say that he/she has all the Wellington FL short sale services a client would need, but only time can tell if the agent can suit his/her actions to words. Unfortunately, most homeowners pursuing short sales can’t afford to waste that much time for assessing an agent’s
expertise in short sales. If you need to short sell your home urgently then you definitely need the most competent agent to back you up.
How much experience does the agent have?
When looking for an agent who can offer Wellington Florida short sale services, always make sure that you choose someone who actually had experience offering those very services he’s/she’s talking about. Just because they offer it on paper doesn’t mean they’ve actually gone and done them in real life.
And of course, don’t just take their word for it. Ask for proof – documents that show short sale approvals and referrals from their previous clients.
How long have they been handling real estate transactions in Wellington FL?
Agents can offer the best Wellington FL short sale services if they understand and appreciate the area the way locals do. They don’t have to live in Wellington FL to be good at their jobs, but they do need to have spent at least a few years buying and selling homes in the area to know which neighborhoods are most suitable for which type of clients.
You have to remember that most homebuyers purchase homes only in areas or neighborhoods that they like. Before an agent can start short selling your home to a buyer, they need to promote its location first.
Do they specialize in short sales?
Just because you scored an A in a math test does not make you a genius or give you a beautiful mind like John Nash’s. Likewise, just because an agent successfully short sold a home or two in Wellington Florida doesn’t mean he’s/she’s an expert in it as well.
Specialization takes years to acquire. It’s a combination of skills, experience, and a special kind of understanding of a particular area – which in this case would be Wellington FL. The process for short sales may be the same all over the country, but local market trends definitely affect the outcome as well
as other factors like the mentality of creditors in your area, what type of home you may have, and so forth.
If the agent you’re working with can truly prove he/she specializes in Wellington FL short sale services, then you have yourself a winner and you’ll surely be able to sell off your home in no time.
First Wellington Short Sale We Closed On Was In February 2008.
We started listing short sales in Wellington as a commonplace listing in January of 2007. Those were the days! LOL! It was the Wild Wild West in short sales. That was the tag line if you attempted to do short sales in 2007 in Wellington Florida!
To put this in perspective Countrywide was still in business! In fact, during those times, Countrywide was the bulk of the short sales. Those were interesting times. There were no rules. In fact, Countrywide did not have many rules.
There was no HAFA, there was no HAMP, there was NO Equator, there were no incentives to lenders to get short sales done. In some ways we liked it better in the Wild West days because it was the agents and brokers that knew how to negotiate short sales and communicate with the banks that the lenders and servicers depended on.
We were in the ground zero of foreclosure territories in Florida. We were the ones in the streets watching the values of homes fall literrally overnight and waking to a storm of homeowners in default and a flood of foreclosures coming down. So the lenders depended on Nestor Gasset and other brokers like Dan Forbes on the west coast of Florida to help them determine the values of the properties we were listing as short sales.
The first short sale we actually closed was on February 21, 2008. It was a condo in St. Andrews in Wellington.
The address is 11750 Saint Andrews.
We knew that this short sale was only going to sell for about $190,000 at that specific time. But the servicer who was not a big lender countered our offers back at $269,000. We had a nightmare of a BPO from an agent who lived over 80 miles away from Wellington with no clue of our values here. He did not have any comps because there were no comps because nothing sold since the bust.
We fought, fought, negotiated, negotiated. We kept showing the lender that the longer they were stubborn about $269,000 the lower price they would end up getting.
In the end, we were right, the lender was wrong. The unit finally sold after all this time for $150,000!!!! Look how much money the bank lost on this deal!
This Wellington short sale condo was on the market for 402 days!
When agents complain today about short sales taking so long we remember the days of over a year for short sale approvals and that is without buyers walking! Never say never, when we were writing about these negotiations on ActiveRain back then, 99% of the agents said they would never do a short sale. There were posts I can dig up about how doing short sales would be too much liability to brokers so they would not allow their agents to participate in short sales. Now, look at the posts on AR about short sales:).
We had to create our own short sale addendums because even the state boards did not have forms for short sales in January of 2007 and our MLS, well, that is a whole other post!
Here is the testimonial letter that the owner wrote to us after his closing:
I just wanted to thank you again for all your effort and hard work. I can truly say that I have never had a real estate agent work as diligently and persistently as you both did selling this condo. I really thought it would be impossible to sell the condo in this brutal market, but you somehow came up with multiple buyers and put a deal together. I will highly recommend you to anyone I know who is in the market to buy or sell property in the Palm Beach area.
You guys are the BEST!!!
Some homeowners end up trusting the wrong Wellington Florida short sale agent simply because they feel it is “bad” manners to ask too many questions. That, unfortunately, could be their biggest mistake. As the owner of the house, you are the agent’s client and you therefore have every right to ask all the important questions.
What Questions Should You Ask a Wellington FL Short Sale Agent?
It’s your privilege to choose the best Wellington Florida short sale agent you can find to represent your home. Don’t waste that chance as you usually only get one with your creditor or banker. To help you find the ideal real estate agent to work with when short selling your home, here are several questions you could ask a prospective agent.
How long have you been working with short sale clients in Florida?
There are two reasons for asking this question. Firstly, you want to make sure that the agent has more than enough experience working with short sales. It’s a whole new ballgame compared to the rest of transactions taking place in the real estate industry.
Secondly, you want to make sure that the agent’s experience has to do with short sales in Wellington FL or at least in the state you’re in and elsewhere. This is critical because laws on short sales tend to vary from one state to another. Short sale laws in Florida, for instance, are practically the opposite when compared to those regulating short sales in California.
How many short sales have you completed in the past three years?
A Wellington FL short sale agent with numerous short sales tucked under his or her belt is all well and good, but how many of those sales had actually taken place in the past three years? You need to make sure that your agent has been active in recent years. If not, your agent may not be in the best position to understand current trends in the local real estate market. Consequently, your agent may also not be aware of the latest modifications on laws governing short sales.
Has the Wellington FL short sale agent dealt with your creditor in the past?
Having an agent familiar with the ins and outs of working with your creditor would be a huge bonus so try to find one who comes to the negotiation table with this kind of experience. If your loan is serviced by your bank but is actually owned by another company, it would be helpful if your agent – or even you – have the necessary contacts to get in touch with the latter.
Even with financial aid packages starting to pour in from banks, there are still hundreds or even thousands of homeowners who won’t qualify for such help and are thus in dire need of the services of a Florida short sale specialist. Some time ago, the courts have ordered a number of banking corporations to offer additional financial aid – or even return deeds to previously foreclosed homes – to homeowners who have been wrongfully evicted from their properties.
If, however, you are only in the brink of foreclosure then such financial aid packages are not yours to enjoy. There is still a good chance that your bank or creditor would seize your property and foreclose it if you don’t take proper precautionary measures ahead of time. One such measure would be to approach a Florida short sale specialist and get him or her to help you.
Are Short Sales the Ultimate Solution?
Unfortunately, not all homeowners would be considered eligible for short sales. The conditions vary from one creditor to another. Ultimately, however, you or – more specifically – your Florida short sale specialist would have to prove that it’s to everyone’s benefit that you are allowed to short sell your home as soon as possible.
What Do Short Sales Entail?
Let’s say that your house in Florida may be sold today at $600,000. Unfortunately, your home used to be worth $800,000 and in fact you have mortgaged it to the hilt and thus owe the bank $800,000. Obviously, it would be pretty impossible for you to sell your home at its original price. But if you sell your home based on its current market value, then that would mean losing about $200,000 in the process.
$800,000 Original value of your home or the amount of your mortgage balance
$600,000 Present market value of your home
$200,000 Negative balance if you sell your home at its present market value
This won’t be that big a problem if you fully own your property and it’s not encumbered in any way. Although you are losing $200,000 technically, it’s not something that would significantly hurt your finances.
But it’s different if you owe $800,000 on your home and are no longer able to keep up with mortgage payments. To prevent foreclosure and an unwanted blemish on your credit record, you would need to sell the home. But even if you do sell it, you would still be left with a $200,000 debt you can’t pay.
Now, this is the part where a Florida short sale specialist can step in and help you out.
A short sale specialist would do the following to ease your burden:
Has your Wellington short sale agent asked you to write a short sale qualification letter? If a terrible case of writer’s block is preventing your pen from pouring out words onto paper, here are some tips that could prove helpful in your writing quest.
Think of it as “coming clean”.
Everyone makes mistakes. Deliberate or not, foolish or not, you can’t keep blaming yourself for your financial hardship. When writing a short sale qualification letter, it’s essential that you forget about your pride and just come clean about your financial situation at present.
Think of it as a report.
Reports are different from, shall we say, essays in the sense that creative liberties are more abundantly offered with the latter. A short sale hardship letter is not an essay. You do not have the luxury of time to wax poetic about the difficulties you are facing. Rather describing your financial struggles with qualitative words, you need to focus on cold hard facts and figures. If they come with computations, so much the better! Stick to anything that’s measurable.
Don’t, for instance, be content with merely stating that you are on the brink of poverty. Rather, you could say that you are earning $XXXX, which is XX% below the average income in your area.
Think of it as a story.
Although the short sale qualification letter should have a factual foundation and can serve as a paragraph-formatted report of your financial situation, your letter should also read as a story. No creditor would feel the need to approve of your short sale application without any justifiable reason.
So you’re earning a below-average salary. Why is this so? Is it your fault? Are other extenuating factors to blame? You need to make them see the bigger picture and understand what contributed to your current situation.
A good short sale qualification letter is one that has a past, present, and future. With regard to the past, your letter should summarize the various factors and events that led to your current state. Describe your struggles at present and explain how both the past and present are likely to paint a horrible picture of your future if you don’t short sell your home.
Think of it as an appeal.
Lastly, remember that creditors don’t owe you anything. It is not your right or privilege to ask for a short sale. You are in their mercy – and not the other way around. As such, you need to take very care when choosing the right tone for your short sale qualification letter. It must sound like an appeal and not a demand.
Perhaps you have noticed how a lot of real estate agents have been recently promoting Wellington Florida short sales as an effective way for avoiding foreclosure. While that is certainly true, you should know that not even the most experienced and competent agents can guarantee the completion of short sales.
When choosing which agent to work with for short selling your home in Wellington, FL it is very important that you find someone who is absolutely honest with you and will not seek to convince you with exaggerated claims or, worse, false or misleading information about short sales.
LIE #1: NO CASH CONTRIBUTION FROM THE HOMEOWNER
Be very wary of agents who tell you that they can short sell your home without any contribution on your part. Even if they have found a willing buyer for a more than reasonable price for your home, it’s still ultimately the lender’s call as to whether that price is sufficient or not.
Your creditor or lender is also the only one who can determine whether you should make a cash contribution or not upon the sale of your home.
LIE #2: NO LARGE CASH CONTRIBUTION FROM THE HOMEOWNER
Some agents play it a little bit safer by saying that Wellington Florida short sales typically involve only a small amount of cash contribution. While it’s not as worse a lie as the first one, it’s still an absolute lie.
Lenders don’t just have a say as to whether homeowners would be required to contribute cash or not when their homes are sold through short sales. Lenders naturally have the power as well to determine how much the homeowner would have to contribute.
Even if your agent argues by pointing how the Wellington FL market is currently doing very well and should thus lead to an increase of your property’s value, it’s still the lender’s call. If he wants you to pay more than what other lenders are asking from other homeowners, he’s well within his rights to do so. It’s just your bad luck to have an unreasonable lender.
LIE #3: NO PROMISSORY NOTES
Other agents may tell you that successful Wellington Florida short sales will mean full payment of your mortgage. While that’s true, these agents may also neglect to inform you that your lender would also require you to sign a promissory note afterwards. Promissory notes often but not always require you to pay the remaining balance over a specified period of time without interest.
LIE #4: FULL PAYMENT NOTED
Again, this is not always the case. Lenders who agree to Wellington short sales may, however, insist that it is noted in public records that a full payment had not been made.
Although the word “short” in Wellington short sales technically refers to the decrease in the home’s selling price, most people nevertheless assume that it may also means a minimal waiting period – or maybe even none – for its processing. Unfortunately, the opposite’s more often true than not and here are the five most common reasons for it.
You are your own worst enemy. No doubt you’ve heard that line before, and it certainly applies to the short sale process. Short sales can be pretty distressing and especially when you find it particularly hard to admit to financial difficulties in your hardship letter. Just be reminded that the longer you delay the inevitable, more debt would be piling up on your doorway.
Banks don’t always have in-house professionals capable of appraising the fair market value of your property. Most of them contract appraisers to do this, and if they are dealing with a very busy appraisal company then that means more waiting on your part. In other cases, a BPO or broker price opinion is used instead. This, however, can also consume a lot of time.
Mortgage Insurance Company
Getting approval from the bank is hard enough as it is, but that’s just the beginning. The second hurdle in getting Wellington short sales approved will be to get a nod from your property’s mortgage insurance company instead. Paperwork that you get from the bank will have to be submitted to insurance companies. If you are lucky, you could have those papers reviewed and approved in several weeks. The average, however, would be around thirty to forty-five days.
Last but not the least, there’s the bank to consider. Banks play a very integral role in the short sale process and if they don’t give their green light to the deal then nothing would happen. Unfortunately, even if they do want the short sale to push through as quickly as possible as well, it still doesn’t end up that way.
If you’ve followed recent foreclosure reports, you may have noticed that a lot of banks are under fire for not showing up in mediation sessions with all the required paperwork. Well, it’s the same with the short sale process.
As you can see, even if you have a really good realtor working for you there are just some things in the Wellington short sales process that is entirely out of his or her hands.
What is a Wellington Short Sale?
We created this very short 2 minute video for you to answer the question: What is a short sale?
Short sales have been around since the origin of the mortgage and loans for homes- properties and other tangibles and non-tangibles. But most people had not really heard what a short sale is until the real estate bust in 2007. Most real estate agents did not know what a short sale was until recently either. Most homeowners did not know what a short sale was and many homeowners still don’t know that a short sale is a great option to foreclosure in many circumstances.
If you are looking for an easy way to explain what a short sale is this video is simple, fast and straight to the point.
Contact Nestor Gasset or Katerina Gasset for a confidential short sale interview to go over your short sale options and avoid foreclosure today.
Authored by Katerina Gasset
We take pride in closing our short sales and treating our sellers with dignity, respect and empathy as they deal with this chapter in their lives. It is great to help sellers close this door and move on with their lives. With tenacity and assertive proactive actions we make sure that the short sale lenders understand our sellers’ positions and see that it is in everyone’s best interest to not go down the foreclosure path.
Here is another testimonial from one of our short sale sellers that we closed on:
Dear Nestor and Katerina,
I am writing this letter to express my complete satisfaction and gratitude for helping me short sale my property. I cannot thank you enough for helping me through my short sales process. You guys have gone above and beyond what I had expected and have made me feel as if I was a dear friend and not another client. I am especially pleased with the professional service you and your staff provided me, it has been first class. Your knowledge and timeliness has saved me time and money. I could not believe how quickly you worked to get my property sold. I am happy to recommend International Properties and Investments to any that ask, confident that they will experience the same satisfaction in service that I have.