shannon.pich…, Home Buyer in San Martin, CA

Can you buy a short sale home with an FHA loan? What is a short sale process? Thank you!

Asked by shannon.pichler, San Martin, CA Mon Oct 1, 2012

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The HUD Preforeclosure Sale (PFS) Program allows the defaulted Borrower to sell his/her home and use the Net Sale Proceeds to satisfy the mortgage debt even though the Proceeds are less than the amount owed.

Here is a link gets more information about condition:
2 votes Thank Flag Link Wed Jul 22, 2015
Yes, you can buy a short sale with an FHA loan. Talk to your lender about what is required in an FHA Loan. A short sale process is you make an offer, seller accepts offer and then the bank has to approve the short sale. This could take a very long time because banks are very slow. Sometimes a bank will approve an amount and then change their minds. For example:
List price is $100,000
Offer will be made at $100,000
Seller accepts offer of $100,000
Bank counters offer at $115,000

It's a long process so get comfortable and find a REALTOR in your area you trust and is good at communicating.
1 vote Thank Flag Link Thu Oct 24, 2013
Q: Can you buy a short sale home with an FHA loan?
A: Short answer:

Yes - if it’s a single family home/PUD/Townhouse and conforms to FHA’s condition requirements. It has to be completely habitable from day 1.
Yes – if it’s a condo that is on FHA’s approved condo list AND conforms to FHA’s condition requirements.

Here is a link where you can get more information about condition requirements:

The FHA's Minimum Property Standards…

Q: What is a short sale process?
A: You’ve received a good answer below – here is post that may be helpful as well:

Short Sale Myths: 8 CRITICAL Issues You Need To Understand…
1 vote Thank Flag Link Wed Oct 3, 2012
Hi shannon.pichler,

Great question. I'd like to chime in to answer the part about the Short Sale Process.

As a seller the short sale process consists:

- Submitting to the lender a formal letter describing your financial hardship, in detail, and financial statements documenting that.

- Check to make sure that the financial institution received all of this.

- Waiting for an approval.

- If approved, hiring a real estate agent, with experience in short sales, to list property, set price, accept offers from buyers and present them to lender.

- Communicating through your real estate agent, not directly with the bank. You lender will let you know the offers that have come in are sufficient and approved. Once they approve a price, the sale will close much like the process of a regular sale.

There are more details and information and links that I think you will find very useful within an article I have written called "What is a Short Sale?"

I hope this helps!

0 votes Thank Flag Link Fri Jul 24, 2015
You absolutely can..only issue is that unless it already an approved short sale it will take a few months to complete. The reason is that the bank selling the property has certain things they must do before it is actually approved.. short of that its as easy as 123

Riccardo Wardlow
VP of Mortgage Lending
NMLS 219402
Guaranteed Rate

Specializing in Illinois and California

*We do Conventional loans down to a 620 score
*We do FHA loans down to a 600 score
*We do USDA loans down to a 620 score (no money down)
*We do $100 down payment FHA program
*Unlimited Loan To Value refinances on Fannie/Freddie refinances (only on loans originated before May 31st 2009
*We do VA loans down to a 620 score
*We give free counseling on what needs to be done to improve your credit score.
*We do 203k loans down to a 640 score
*We do reverse mortgages
*We do JUMBO loans to 12 million
*Investment properties
*Closing loans in 3 - 3.5 weeks
0 votes Thank Flag Link Tue Jun 30, 2015
Yes you can, but if you buy a short sale make sure that you look for "approved short sales", they are already approved by the sellers lender. All other are not approved and may take month up to a year to be approved. You might wait a year to have the short sale approved only to find out that the lender may not approve the price. meanwhile home prices are rising as well as interest rates.
0 votes Thank Flag Link Mon Jun 29, 2015
Although an old question that has been brought back, is still relevant today, It is unlikely a FHA loan can be used to buy a short sake as it may take too long to get it approved in closed. Most banks will only give 30 days to close once approval takes place. You would need to have your loan completely ready to close to pull it off and have a short sale that works quick. The problem is most are not,
0 votes Thank Flag Link Mon Jun 29, 2015
I had a short sale last year and my Realtor recommend for a home loan. I am very happy to be able to purchase again.
CFS Mortgage assists homeowners who have recently been through a foreclosure, short sale or have recently emerged from bankruptcy.
0 votes Thank Flag Link Sun Jun 2, 2013
With all due respect to Trevor from New York, it is NOT a buyer’s market in San Martin or the rest Santa Clara County or even the rest of the California Bay Area, for that matter. In fact, if you don’t keep REO’s and short sale on your list of options, you may not get a house of any kind.

Trevor states, “There are plenty of motivated Sellers with their homes listed on your local MLS.” That is actually not true. As of the end of September, there were less than 20 homes on the market in all of San Martin. Sold prices have increased 9.4% in the past 12 months, while list prices are up a whopping 19%. The current lowest price home is an REO listed for $480,000. The next lowest price is $649,950 with the highest price being $3,750,000.

Those of us who’ve done a high volume of short sales here in the Bay Area can explain the ups and downs of short sales. It’s true you may have to wait. However, in a rapidly escalating market, you can actually score a good deal on a short sale – if you can win the bidding way to get one. Trevor again mentions, “buy the home you want at the price you're willing to pay. It's a Buyer's Market, after all!” That’s absolutely not true here. While it may be the case in NY, here in the Bay Area we are in an escalating seller’s market with multiple offers on almost every home that hits the market.

One thing to keep in mind: when buying FHA, you have limitations on your maximum loan amounts. Contact a local lender to get the limits for your area – this will definitely affect the type of house you will be able to buy.
0 votes Thank Flag Link Wed Oct 3, 2012
I noticed that Trevor tends to cut and paste that exact response anytime a short sale or foreclosure is mentioned on trulia!
Flag Wed Oct 3, 2012
Good morning shannon.pichler,

I've been helping First Time Buyers for 23 years as a mortgage professional and I will tell you what I have always told my clients here in New York: If you are a First Time Buyer, steer clear of foreclosures and short sales.

Foreclosures are someone else's headache. The home probably has not been well-maintained and you're a First Time Buyer adjusting to paying a mortgage. Do you really want to walk in the door to someone else's deferred maintenance that YOU will have to pay for? Also, if you're thinking there are deals to be had in terms of lower prices, mostly those "deals" go to professional investors who can pay cash, negotiate hard with a Lender, and close fast.

For Short Sales, my attitude of late is that First Time Buyers should steer clear. Short Sales tend to be a better deal for the homeowner than for the Buyer. You'll wait MONTHS for the homeowner's Lender to approve the short sale; maybe as long as Six or Seven Months. Meanwhile, you're stuck in a contract to buy that home. I closed a short sale recently with a Buyer who, after seven months said this at the closing table, "I don't even want this house anymore."

And he didn't even get the "deal" on price he thought he was getting! The house appraised for only slightly more than he paid for it at the short sale price. He walked into this deal thinking he was buying a home for $100,000 less than it's value. In the end that wasn't the case.

There are plenty of motivated Sellers with their homes listed on your local MLS. Go find a good Local Mortgage Banker, get prequalified, then find a great, experienced Realtor, and buy the home you want at the price you're willing to pay. It's a Buyer's Market, after all!

Trevor Curran
NMLS #40140
0 votes Thank Flag Link Wed Oct 3, 2012
You may purchase a short sale property with whatever financing you would like.
The seller may have prejudices against one particular type of financing, but FHA will allow you to purchase on this type of transaction.
0 votes Thank Flag Link Mon Oct 1, 2012
Of course you can purchase a short sale using an FHA loan. Whether your offer gets accepted by the seller and their lender is another matter.

As long as the home you are buying meets the requirements that FHA sets forth, you are absolutely able to buy a short sale.,
0 votes Thank Flag Link Mon Oct 1, 2012
Tomas has already dealt with the FHA question.
Re "What is the short sale process" here a brief expanation:
A completed Short Sale means that one or more Lenders holding leins (Mortgages) gets less than the full amount required to payoff the mortgage.
When you make an offer on a possible short sale property you are dealing with the current home owner. If accepted by him/her your offer must now be approved by all lenders holding mortgages on the property. This is the cause of most problems with short sales as the sale cannot be completed without all leinholders agreeing, and getting that agreement is not a certainty.
Your Real Estate Agent must be able explain what is happening, but will seldom be knowledgable enough to handle the negotiations involved and it is usually better to have a specialist handle dealing with the banks etc which are involved.
If the contract is structured correctly the fee for this person can be (indirectly) paid by the main bank involved i.e. First Mortgage holder.
Short Sales will always take longer than a conventional purchase, and contrary to what you might hear will never be bargains. The Banks who have the final say will have the property appraised and have no reason to sell it for less than it's true value.
Good Luck
0 votes Thank Flag Link Mon Oct 1, 2012
It depends on the property. FHA has specific guidelines. No pealing paint, visible health and safety issues must be corrected. No hugh power tower within a fall line of the house. If it is a condo it must be on the FHA approved list. Property needs to appraise or buyer may need to make up the difference.

The other issues is competing with other offers.

Short sales come with a special addendum and there is no promise that it will close. It can take a while. You agent will go through all the details for you.
Web Reference:
0 votes Thank Flag Link Mon Oct 1, 2012
Yes you can as long as the home is FHA approved which means that it meets FHA lending standards.

To find condo/townhomes in a FHA approved complex visit this website for single family home standards check out this website…

Remember that while you can bid on a short sale home with a FHA loan, chances are that you will not win when put up against conventional loans or all cash offers. This usually due to the extra time it takes to process a FHA Loan which the seller may not want.

If you have any further questions please give me a call at (408) 840-3852 or
Web Reference:
0 votes Thank Flag Link Mon Oct 1, 2012
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