Buy and Bail Protection

by Craig Bohall

One of the best ways to buy a foreclosure in this market is of course with no money down. Think about it,  you put no money down and buy a home for let’s say 100,000 that was selling for 200,000 a year and a half ago  – that’s not just a good deal it’s an amazing deal. USDA has 100% financing or “rural” areas. Yes that means you people who want to live in the city can not get this!  But they are even coming around to the buy and bail protection that Fannie and Freddie and FHA have already put into place.

So everybody seems to be falling into line on this policy – here is the exact wording from USDA…

An increasing number of homeowners are attempting to purchase new homes but cannot sell their existing principal dwellings because of prevailing market conditions. Some homeowners are attempting to retain and rent out their existing principal residence, while at the same time trying to purchase a new principal residence. The homeowners attempting to rent out their existing properties are producing newly signed leases as evidence of income to offset the costs of maintaining the old residence and continue making payments on it. Increasingly, income from the new leases never materializes and the old principal residence goes into foreclosure.

Newly signed leases:

A newly signed lease has no historical basis to conclude that the income is likely to continue. Applicants who wish to purchase a new principal residence and retain or rent a residence must qualify with all mortgage liability payments. Income from newly signed leases cannot be used in debt ratio calculations. The exclusion of rental income will ensure the applicant has sufficient monthly income to meet all mortgage and liability payments. This applies to manual and automated underwritten loan files.

So basically if you want to buy a screaming deal out there right now but have not sold your home first – NO PROBLEM –  just make sure that your payment on your current home that is for sale and the new home mortgage payments added together are still something you can qualify for with your current income. If not, sell your home first then find the screaming deal… if the deal is gone just stop close your eyes and listen  – I promise you that you will hear another deal screaming very close by.

Buy and Bail Part 2