Short Sale versus Foreclosure Consequences

The following information was taken from Northwest Insights, a publication by Darlene Stouder.

(Article begins here; then please click on charts below for enlarged view and complete information detailing short sale and foreclosure differences.)

"A short sale is the term used to describe a house that is sold for less than what is owed to the bank. Proceeds from the sale fall short of the balance owed on a loan secured by the property sold. The bak ofr mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. Negotiation is all done through communication with a bank's loss mitigation or workour department. A short sale typically is executed to prevent a home foreclosure."

Improving Your Credit Rating

This report came from MetLife Home Loans, a division of MetLife Bank.

"Perhaps the most significant part of your credit report is your credit score. Credit scores range from 350 to 850, with 850 being the best possible credit score you can receive and 350 being the worst. There are five factors that determine your credit score:

YOUR PAYMENT HISTORY: 35% impact on your credit score... pay your bills on time.

THE BALANCE OWED VERSUS YOUR AVAILABLE BALANCE: 30% impact... keep balance at 50% of available.

YOUR CREDIT HISTORY(HOW LONG ACCOUNTS HAVE BEEN OPENED): 15% of your score.

THE TYPE OF CREDIT YOU HAVE: 10% of your score. A variety of credit is best.

THE RECENT INQUIRIES INTO YOUR CREDIT: 10% impact. The less inquiries, the better.

Keep the above factors in mind and use them to improve your existing credit score. Most, if all, loan rates are based heavily on your credit score; be sure to take advantage of the lowest rates by keeping your credit score high."

Got a downpayment??

This article was taken directly from the Lewiston Morning Tribune, Wednesday, March 5, 2009.

FHA loans allow creativity

Frugal Homeowner

By Julie Garton-Good

Wednesday, March 4, 2009

Q: I'm engaged, and my fiance and I would like to take advantage of the great buyer's market for our first home. We have good income and credit, but are lacking in the down payment department. Any ideas? - D.U.

A: This is a great first-time buyers' market. The standard Federal Housing Administration 203(b) program is an excellent mortgage for first-time buyers and has perhaps the most creative assortment of down payment options out there right now.

The following are some of the many options to help you shake the down payment money tree:

1. Bridal registry accounts: This is one resource you shouldn't overlook. Since 1997, FHA has allowed friends and relatives to contribute to an account for down payment and closing costs for engaged parties. In fact, similar accounts can be set up for other occasions (e.g. graduation gifts, etc.) for anyone who's a potential homebuyer.

Here's how it works: You contact a lender who originates FHA loans and set up a federally insured depository account in both you and your fiance's name. Funds may be deposited by friends and relatives directly into the account, or cash or check sent to you to for deposit. Not only will this approach help you accumulate your down payment, but money will be tracked using FHA guidelines, in preparation for your loan application. And yes, you can use the money to close on a home prior to being married. In fact, the funds remain under the control of the individuals for whom they're deposited and can be withdrawn at any time prior to use.

2. Gifted funds: Family, close friends (with no financial interest), employers and even charitable organizations can gift funds to you for all or part of the down payment. The primary criteria are that funds have no repayment strings to the giver.

3. Loans from immediate family members: Loans received from family members must be calculated in your debt ratios for qualifying, but can be either unsecured or security against the property you're purchasing.

4. Rent credit: If you desire to purchase a home you're currently renting, the amount of rental payments that exceed the fair market rent can be considered as part of the cash investment. For example, if fair market rent for the property (as determined by the lender and appraiser) is $850, but your rent is $1,000, $150 each month can be counted as cash contribution applied at closing.

5. Sweat equity: If you perform any labor or contribute materials to a property prior to closing, those amounts are considered cash contributions. This applies to both new and resale construction.

6. Sale of personal property: If you plan to sell personal property to generate cash for the purchase (like a car, motorcycle, boat or eBay sale), those funds can apply to your down payment. This would, would, however, require a third-party estimate of value.

7. Sales commission credit: If a family member is a licensed real estate agent and is entitled to commission from the listing/sale of your house, he/she can gift that money to you for the purchase.

Not only is the market ripe for first-time buyers, there are a plethora of creative down payment options through programs like FHA. There's no need to let the lack of a large cash down payment stand in your way.

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Julie Garton-Good is a Realtor, international speaker and syndicated columnist. Her e-mail address is jgg@juliegarton-good.com.