New FHA Guidelines make short sales easier than ever!
Short Sale Investors will be downright delirious to learn about changes to FHA laws set to begin in 2009. On December 24th, 2008 the Department of Housing and Urban Development (HUD) released “Mortgage Letter 2008-43“….despite the inconspicuous title, this is a powerful boon to every short sale investor in the nation.
For those of you who somehow managed not to be engrossed by this less than climatic title, here are the MAJOR changes coming soon to a FHA/HUD foreclosure near you!
- Elimination of the clause calling for 63 % or greater property appraisal vs. debt. Now properties can appraise at any value and still be eligible for the program.
- Increased Net. Instead of the former 82 % net based upon appraisal value the new limits will be 88 % if sold with 30 days, 86 % if sold within 60 days and 84 % thereafter.
- Increased Closing Costs on Short Sales. Although not a lot – FHA will now allow up to 1 % of closing costs rather than the former zero.
- Increased Seller Incentives. Again, although not a lot this will at least allow sellers a reasonable down payment toward a rental home by putting up to $1,000 in their pocket at closing.
- Increased Lien Allocations. Junior liens up to $2,500 are now allowed – just one more tool that helps sweeten the pot for short sale investors interested in pursuing FHA/HUD homes.
- Removal of Repair Limitations. This is one change that could potentially add up to thousands depending upon the required maintenance on the home. This opens the doors to many homes that would otherwise be ignored due to excessive damage.
- Exceptions to Non-Owner Occupant Requirements. This is on a case by case basis but opens to the door to rental properties formerly excluded from the program.