The new FHA short sale standards that went into effect on October 1, 2013 should offer some positive changes for Utah homeowners
There are numerous new short sale requirements that went into effect on October 1, 2013. Several of these are important and positive changes with regard to the short sale approval requirements for a homeowner who used an FHA loan to purchase their home. This article will address some of the positive and impactful aspects of these new regulations that will help Utah homeowners to qualify for an FHA Utah short sale approval.
These regulations may not apply to all FHA short sale homeowners. If you are considering a short sale as an alternative to a Utah foreclosure, we encourage you to give the David Robinson Team a call. Our short sale negotiation experience will provide you with more personalized and detailed information so you can determine your eligibility and options.
Deficit Income Test (DTI)
The Deficit Income Test, DTI, is a standardized test that helps banks and lenders determine a person’s financial hardship. In the past these hardships were determined in a relatively subjective way by lenders, thus homeowners who wanted to do a short sale and had similar incomes and hardship details could receive completely different results in terms of being approved or denied a short sale.
The hope for the Deficit Income Test is to even things out so that income calculations will be more standardized. If the homeowner has expenses that are not shown on their credit report, the IRS Collection Financial Standards will be used for verification.
FHA homeowners who decide to sell their home via a short sale may be eligible for a $3,000 seller incentive
A seller incentive of $3,000 is available to homeowners who financed the purchase of their home with an FHA loan. This is an increase compared to what has
been offered in the past, which generally was $750 plus an additional $250 if the homeowner was able to close within a specified, short timeframe after receiving short sale approval from their lender. In many cases the seller didn’t qualify for the additional $250 because the buyer wasn’t able to get their loan pushed through on time.
The lender must order an appraisal within 10 days
According to these new guidelines, lenders must now order the appraisal for an FHA short sale within 10 days. This should be very beneficial, as with many short sales one of the biggest concerns and causes for delay is the lender not ordering the appraisal. Sometimes delays can be several weeks and even a couple of months. The delay in ordering the appraisal causes a myriad of problems, the most important of which is a setback in the file moving along for review of a purchase offer that has been made on the home.
Another aggravating consequence in a delay of the appraisal being ordered is that the paperwork and financials that had been submitted to the bank are deemed expired, and after 60 days they would have to be resubmitted to the lender. The new timeframe of 10 days for the bank to order the appraisal should have a very positive effect on keeping the Utah short sale process moving forward.
New FHA “streamline” short sale option
A new streamline short sale option is now available as part of these new guidelines to some homeowners who have FHA mortgages on their homes. If a homeowner qualifies for this streamline option they may receive an exemption from needing to provide financial hardship proof, which has been a requirement for FHA short sale approvals.
The homeowners that will be classified as qualified for the streamline option are owners of second homes, investment properties, principal residences and some armed service members. There are applicable conditions to those that are deemed eligible for this option and the financial hardship exemption mentioned above.
How do these new guidelines affect you?
In an ever-changing real estate market, it can be difficult to understand how laws and regulations can apply to your specific situation. You need an experienced real estate professional that has studied these guidelines to help provide you with the best options based on your situation. With years of short sale transaction experience, the David Robinson Real Estate Team can help you with every step of the short sale process. We invite you to contact us directly for a free, no obligation consultation.