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After short-selling a home, how long before you can purchase?

How long must a buyer wait before buying a new home if they have:

•         Chapter 7
•         Chapter 13
•         Foreclosure
•         Deed-in-Lieu of Foreclosure
•         Short Sale

Below are the underwriting guidelines for both Conforming and FHA Loans.

CONFORMING:

  • Time Elapsed After a Chapter 7 Bankruptcy: Time elapsed must be 48 months or greater from either the discharge or dismissal date.
  • Time Elapsed After a Chapter 13 bankruptcy: Time elapsed must be 24 – 48 months or greater from either the discharge or dismissal date depending on Cause of bankruptcy
  • Time Elapsed After Multiple Bankruptcy Filings Within the Last Seven Years: Time elapsed must be 36 or 60 months or greater from the most recent discharge or dismissal date depending on Cause of bankruptcy
  • Time Elapsed After Completion of Foreclosure: Time elapsed must be 36 months or greater.

Additionally, the following is required:

  • The property must be owner-occupied, and the loan must be a purchase transaction, and  the borrower must contribute the greater of 10% minimum down payment or the minimum required for the loan program.
  • Time elapsed must be 84 months or greater if:
  • The property is a second home or investment property; or
  • If the loan is a rate and term or cash-out transaction.
  • Time Elapsed After Short Sale or Completion of Deed-in-Lieu of Foreclosure:
  • Time elapsed must be 24 months or greater.

FHA:

  • Time Elapsed After a Chapter 7 Bankruptcy: 24 months since the discharge date and good credit has been reestablished. Bankruptcies less than 24 months (but not less than 12 months) may be allowed provided the reason for the bankruptcy was due to extenuating circumstances, theborrower has exhibited an ability to manage financial affairs, and the reason for the bankruptcy is not likely to recur.
  • Time Elapsed After a Chapter 13 bankruptcy: Bankruptcies are allowed after 12 months of the payout period provided performance has been satisfactory and borrower receives court approval to enter into the mortgage transaction.
  • Time Elapsed After Completion Foreclosure /  Deed-in-Lieu / Short Sale: A borrower whose previous residence or other real property was foreclosed, “Short sold” on or has given a deed-in-lieu of foreclosure within the previous 36 months is generally not eligible.

All of the above information is typically the minimum time frame and each case is treated independently. This information is provided by Bret Cohn who is mortgage broker at Franklin Loan Center.  For more information, please contact him at 760-779-8136.

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May 2009 Price Report

Here are the latest sales numbers for all homes sold within the city of La Quinta as well as all Golf Course homes in La Quinta through May 2009. The blue lines represent 2008 data and the orange lines represent 2009 data.

The chart above shows Monthly sales of homes within the city of La Quinta. When looking at “sold” data, you have to remember that the numbers are generated on the date that the sale is recorded with the county but that the decision to buy was made about 45 – 60 days earlier.

Although the sales in May are still lagging behind the same period in 2008, there has been a fair jump compared to the previous month of April. We continue to notice an improvement in consumer confidence and an increase in activity in the higher priced homes brought on by two factors. The improving markets on Wall Street and the falling prices of homes. An interesting statistic is that as the number of sales increase, the average price per square foot has declined drastically. This is directly related to the popularity and abundance of distressed properties – foreclosures and “short sales” – that tend to bring down the market value of the homes being sold. Earlier this spring, the government sponsored a moratorium on banks releasing foreclosures to moderate their downward affect on the housing market. That moratorium has been lifted but we haven’t seen the expected flood (or even a wave) of distressed property hit the local market yet and, in fact, the “distressed” inventory is currently very low.

The number of homes sold in golf course communities in La Quinta has decreased since this time last year. While the lower end of the market has been extremely active ($400,000 and below), the upper-end (which contains many of the golf properties in the chart above) has been sluggish. This can be attributed to many things, such as the higher interest rates and tougher qualifications in the “jumbo” loan market, although these restrictions are slowing being lifted.

Because of the sluggishness of this higher end market many sellers are reducing prices and offering incentives to lure buyers. If buying a golf property is something on your list, why not take advantage of the incredible prices and seller incentives now, when sellers will work with you, instead of in the future, when the demand starts to catch up with the supply? Especially if you’re buying and planning to hold for 5+ years.

The bottom line…

Unit sales in 2009 are lagging behind the same period last year reflecting the downward trend of the general housing market. Please remember that the decline of the real estate market greatly accelerated in September 2008 when our economy went into crisis and consumer confidence disappeared. We are now, 8 months later, beginning to see increased activity; a trend that many economists believe will continue to grow in the next several months. With home prices as low as they are now (pre 2004), and capital starting to flow back into the banking system, tremendous opportunity exists right now for buyers in all spectrums of the market.

Also, we all hear about “the Bottom”, where is it, when will we hit it etc. We think that it may be closer than you may guess. See my entry: Click here to read “In Search of the Bottom…”

Here are some yearly sales figures (units) for the City of La Quinta from 2002:

Year        All LQ      Golf Course
2002        1,354          259
2003        1,565          652
2004        1,931          813
2005        1,553          657
2006        1,098          491
2007           935          447
2008        1,063          416
2009 YTD    425          152 (May)

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In Search of the Bottom…

In search of the bottom…

Most seasoned Realtors would agree that we won’t really be sure that real estate prices have bottomed out until about 3 months after the much anticipated event actually occurs – when prices stop declining and, in fact, may even appreciate slightly.

Having said that, there are two forward looking indicators that suggest that we are getting very close and that we will reach the lowest plateau this summer.

First, according to the National Association of Realtors (NAR), historically, real estate has appreciated at a rate of about 4.5% annually and if you go back into the 1980’s and plot a straight line indicating that 4.5% increase and then plot the actual sales figures it is quite apparent that that figure is credible. Of course there are a few peaks and dips but overall the actual sales seem to cover that 4.5% line – until 2002.

Below is a graph using numbers from south La Quinta, California, one of the areas where Gallaudet Properties does business but the graph mirrors the national average.

Data from the Desert Area MLS

The graph above represents the price per square foot of sold homes in south La Quinta, California from 1998 through May 2009.

The straight blue line represents the annual 4.5% appreciation factor and the red line is the actual average price per square foot of those homes that sold from 1998 through May 2009.

You will notice that the “Bubble” started in 2002, peaked in 2006 ($343.66) and started to really crash in 2007. At the peak in 2006, the homes were selling 186% of what is considered normal (the 4.5% line) according to the Southwest Florida realtor data. During the month of May 2009 ($235.43), the difference is down to 112% or a 31% decrease from the high. Keep in mind that while the actual sales line may continue downward below the “normal” line, it also may not actually get there but we are statistically very close.

The May 2009 price per square foot ($235.43) is slightly below the average price for the year of 2004 ($239.72).

According to the NAR, we should not expect the price to go much below the “Normal” line and with today’s record low mortgage rates, the feeling that this is a great time to buy is getting stronger!

Secondly, the NAR reported yesterday that “Pending” home sales are up for the third month in a row. “Pending” sales are those that are under contract but have not yet closed. Since the average escrow is between 45 and 60 days, the decision to buy a home that appears as “sold” (closed escrow) today was likely made 1.5 to 3 months ago. “Pending” homes is a much more current number. Read the article

One last ingredient, mortgage rates are at record lows and mortgages are becoming easier to get as lenders are getting more comfortable with the latest regulations.