Want to short sale my house and we got approved for a new mortgage

[AU1971]

Hello

We have a house in CA that is upside down by at least $200,000. We are in the beginning stages of seeing if we can sell it via a short sale. In the meantime, we got approved for a FHA loan.

Can you buy a new house and still short sale the old house? Or will the bank see that we just bought a new house and not do the short sale? I'm assuming they will say no hardship since we purchased another house.

Another question is, let's say we buy the new house and the old one doesn't sell. What then? Can the old bank sue us?

[Moe Bedard]

We have had this discussion on many, many occasions here on the forum about buying and bailing.........the benefits do not seem to outweigh the risk one takes (which is just my 2 cents on the matter, and about all I will say regarding it) it is a personal decision for each individual to make based on their own situation.....

here is the scoop from the FBI's standpoint, followed by the new guidelines for purchase loans...............

Buying another property while knowing that you are going to bail on your current property is considered material misrepresentation..........and a form of mortgage fraud.


Mortgage fraud happens when a borrower withholds information, such as a deliberate intent to stop making payments to another creditor, or falsifies information, either of which would cause the new lender to reject the loan if the lender knew about it.


It's also considered fraud to lie on a loan application and produce false documents to the lender. The FBI defines mortgage fraud as "any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan."


Fraud for housing represents illegal actions perpetrated solely by the borrower. The simple motive behind this fraud is to acquire and maintain ownership of a house under false pretenses.


Of course not everyone is caught...........but if the new application is flagged by an SAR (Suspicious Activities Report) by the FBI, then that could create a bigger problem............then just renting until you are able to buy again........or having an unrelated party buy the new property for you and rent it back to you to purchase later when you are able to.




If considering buying again after a foreclosure/deed in lieu/ or short sale..................

These are the guidelines per FannieMae/ FreddieMac for buying again and the timeframe needed to wait after, foreclosure, deed in lieu, and short sale on conventional loans revised specifically for the market conditions the way they are.


Fannie Mae/ Freddie Mac two private US-based mortgage buyer powerhouses, have set new guidelines to protect business interests and to further safeguard its buyers from foreclosure. The fresh set of policies will affect borrowers who have loan applications submitted after August 1, 2008.

What factors affect the waiting period?

A waiting period is the time from the completion of the foreclosure until the time when buyer decides to purchase a new home. Under the new rules, the length of waiting before one is approved for a conventional loan would depend on two factors – the kind of foreclosure and the extenuating circumstances.

Waiting Period under the Different Kinds of Foreclosure:

Given these new considerations, the length of time before one can buy a home depends on the kind of foreclosure:

Foreclosure – 5 -7 years
Foreclosure which has extenuating circumstances – 3-7 years
Deed-in-lieu of foreclosure – 4-7 years
Deed-in-lieu of foreclosure with extenuating circumstances – 2-7 years
Short sale – 2 years

Extenuating Circumstances
Factors beyond a person’s control are called documented extenuating circumstances. Fannie Mae/Freddie Mac lessens the waiting period if a borrower is affected by the following uncontrollable factors:

Death (not the borrower’s)
Job transfer
Sickness
Accidents which result to severe injury

Additional Guidelines:

Fannie Mae/ Freddie Mac, also have additional guidelines for its buyers. Borrowers should look towards buying a primary place of residence. This means that rental or vacation houses are not considered.

Aside from this waiting period, the following may also required by Fannie Mae/ Freddie Mac for some loans:

a FICO score in the required minimum
a 10% down payment



FHA loan guidelines are a little more lenient than conventional guidelines

Foreclosure/Short Sale 3 years after foreclosure has been completed
Chapter 7 Bankruptcy 2 years after charge off
Chapter 13 Bankruptcy 1 year (everything must be paid off)



Veteran Administration (VA) loans typically take up to two years after a foreclosure, short sale or bankruptcy. The borrower(s) must provide proof that there is no outstanding debt. Credit must be re-established along with an explanation letter and full VA entitlement.

Some lenders will not allow a mortgage within 7 years if you are applying with the same lender that the foreclosure or short sale occurred through. They probably have a bad taste in their mouth from the previous mortgage.

[AU1971]

Thanks for the info!