The Morning After . . . The Short Sale

The East Coast seems a little behind the West Coast in terms of the cycle of :  (1) Housing Price Bubble;  (2)  Deflation and Recession;  (3)  Round of Foreclosures, Short Sales, or Deeds in Lieu of Foreclosure;   (4)  Swelling of the ranks of Renters; and (5)  Return of significant numbers of former homeowners from the ranks of renters to the ranks of homebuyers.  Nonetheless, certain trends are holding true for both coasts and many areas in between:

A full two years into the cycle of Short Selling has helped some upside down homeowners catch their breath and many, perhaps the majority, want back into the homeownership game!   It is also appearing that in most areas of the country and most neighborhoods in Virginia, Short Sellers only saved a significant amount of monthly outflow if they downsized or lowered their standard of living.    The sad reality is that at current interest rates, qualified buyers can still obtain “more house for the monthly payment” than tenants!    According to Trulia, despite “rising interest rates, owning a home is still significantly cheaper than renting at a national level and in most large metropolitan areas, according to Trulia’s Summer 2013 Rent vs. Buy Report.

While rising interest rates are closing the gap between renting and owning, owning is still 35 percent cheaper than renting nationally. A year ago, the difference was 45 percent.”

There is a wonderful tool in the Trulia link above called a “Rent versus Buy Calculator for Consumers” and it will help you decide whether it time is right for you to jump back into the home purchasing market and how much you can save.

The great news for former Short Sellers and even some who suffered foreclosure is that the FHA and a few other mortgage money sources have adopted “new guidelines allow these previous homeowners with a black mark on their credit history to qualify for a new mortgage as soon as 12 months after foreclosure or pre-foreclosure sale (typically a short sale), down from the 36-month minimum window set under previous guidelines.”

According to Forbes this could allow nearly 2,500,000 “boomerang buyers” to return to the market up to 24 months earlier than they could have under former guidelines!

The take away is that competition will potentially remain brisk for homes from those moving up from the ranks of tenants.   Former short sellers who want to keep their options open to trade in their lease for a mortgage and a piece of the American Dream should not delay and allow rates to rise any longer than necessary before re-entering the homebuyer market.    At the very least, consider interviewing several loan officers to begin the pre-qualification process and get their advice on “credit repair”.   Pay your bills on time and monitor your credit report.   We have had several short sale clients report back to us as much as 9 months after the short sale closing that their lender still showed their mortgage as “significantly delinquent” rather than as “paid in full for less than the full amount due” as is normal with short sales.   These types of things can delay the ability to qualify for a new mortgage.

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