FHA Short Sale Guidelines
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Do you own an FHA or HUD insured home and want to do a short sale? Here are the FHA short sale guidelines:
- You must list the property with a licensed real estate broker who is not related to you.
- You must be at least 31 days delinquent when you sell the home.
- You have to keep the house on the market for at least four months, possibly as many as six.
- The home must be owner-occupied, exceptions are made for death, divorce, unemployment, or job transfer.
- Realtor commissions cannot be more than 6%.
- You have to be pre-approved in order to be qualified for a short sale.
- There must be documentation proving your decreased income or inability to make the mortgage payments.
- HUD will reimburse the buyer for up to 1% of the mortgage as part of closing costs if the new mortgage is also FHA-insured.
- HUD will not pay for points, home warranties, or lender’s title insurance.
- All short sales must be “arms-length” transactions.
- HUD will pay the lender up to $1,000 if the sale is closed within 3 months from the date of application
- HUD will pay up to $1,500 for the discharge of secondary liens after the primary lender’s incentive has been applied.
- The borrower must not be encouraged to default on their mortgage in order to participate in the short-sale program.
- The property may not be an investment property
Due to falling property values and rising unemployment, short sales are becoming increasingly popular as an alternative to foreclosure. Selling a property at a short sale is often preferable to a foreclosure for all involved parties because of potential short sale benefits.