General Size Up of a Post Short Sale Mortgage

[denny123]

Hey everybody, I'm asking this on behalf of a buddy of mine so I might be a little short on details, but we would appreciate sort of a general size up of the situation.

 

Him and his new fiancee are planning on buying a home in the not so distant future(ideally just before the end of the year) and they're wondering if a relatively recent short sale is going to be a big issue.

 

Details:

Him:

-Short Sale closed January 2011 for primary mortgage

-Paid off secondary mortgage in cash at that time

-At the time he had 1 Fidelity credit card of which he has never received any adverse action on and has a limit of $9k. He pays it off every month

-He financed his vehicle from his parents and just paid them interest so there is no auto loan

-No other baddies

-$0 in carried debt(besides paying off credit card every month)

-No other open credit lines that I'm aware of

-Income should be in the ~$90k territory

-Current credit score about ~690

 

Her:

-Clean credit report no baddies

-$0 debt probably a credit card that is paid off every month

-I've been told a ~700 credit score

-Income ~$35000 plus another ~$5k of variable free lance self employed income that she has been reporting for more that 2 years.

 

They're looking at about $250k-$300k range for a place and they would put 20% down.

 

So first of all, I would take it that there is a chance she might just be able to skate in and qualify by herself, but it's probably going to be a hard number right at the low end of their price range, right? What are the general prospects for him qualifying on his own with the short sale in there? How about both going on the mortgage? Is there anything they can do to improve their situation between now and then or is it a bit too late to add some more credit lines to increase their overall revolving limits?

 

Lastly, if push came to shove and they were having issues his parents have made it clear that they would co-sign if need be, but obviously it would be preferred if that wasn't necessary. If it came to that are there any issues with a non member of the household co-signing if the financial position of the parents are basically amazing? Ultimately if there was an issue there his parents have also made clear that they would cut a check for cash and then stand in as a family bank with them paying the interest rate and mortgage payments to them. So ultimately they'll be able to buy one way or another, but obviously they would rather go conforming themselves before having to rely on the parents.

 

All general thoughts much appreciated.

Edited May 22, 2013 by denny123

[luckydriver]

i cant answer much but this:

 

her 35k cannot get her a 240K mortgage alone

 

the scores are definitely good for FHA but i think conventionals want 720 for the best scores. the good news is you wont have MIP so to me thats excellent!

 

i understand you are worried about a thin file but i think i'd talk to an underwriter before getting new credit so close to getting a mortgage

 

2 points for them wanting to do this alone. family and money is never a good idea. plus then i guess they dont get the benefit of reporting on their reports either

 

i dont know about short sales at all but if it counts like a foreclosure it's 3 years after the title is out of his name. lets hope it's not the same thing for him.

 

otherwise will be the family bank for sure

[denny123]

i cant answer much but this:

 

her 35k cannot get her a 240K mortgage alone

 

the scores are definitely good for FHA but i think conventionals want 720 for the best scores. the good news is you wont have MIP so to me thats excellent!

 

i understand you are worried about a thin file but i think i'd talk to an underwriter before getting new credit so close to getting a mortgage

 

2 points for them wanting to do this alone. family and money is never a good idea. plus then i guess they dont get the benefit of reporting on their reports either

 

i dont know about short sales at all but if it counts like a foreclosure it's 3 years after the title is out of his name. lets hope it's not the same thing for him.

 

otherwise will be the family bank for sure

 

From what I understand the short sale on a credit report is pretty much indistinguishable from a foreclosure, but online I'm reading there is different wait times than foreclosure and that it might be possible to get prime(agency--GSE backed) mortgage after 2 years if it's 20% down(4 years if 10% down). I know that FHA is 3 years, but they were probably going to try for normal conforming so is it really 3 years across the board?

Edited May 22, 2013 by denny123

[denny123]

Any mortgage brokers here know of the ability to find lenders that don't impose overlays on the 2 year GSE conventional timeline for 20% down? I'm reading from 2012 that while those are the minimum standards that lenders are almost across the board putting up the "extenuating circumstances" underwriting overlay on top of the GSE minimum. Is that still true? Is that going to be a big issue?

Also, does it change anything if maybe friends dad hands over ~$250k in cash for a note and then immediately go through the refi channel to cash out the equity and pay back the note from father? Or is the refi channel basically going to be the same on strictness as the new purchase channel?

 

 

Also, like almost all people that have short sold a hole the lender did require that he go late before they would agree to a short sale(so above apparently no baddies for him is incorrect--no baddies with anything but a late before the short sale). For being late on a mortgage payment ahead of a short sale is there any use in trying to use some of the techniques often talked about on here to try get those off?

Edited May 22, 2013 by denny123