While purchasing a short sale property is a bit different than a traditional transaction, financing a short sale is actually pretty similar to the traditional buy. Here we’ll run down a few tips that may help you as you determine what type of loan and home purchase is right for you.
First things first: decide which type of loan is best. A loan backed by the Federal Housing Administration features flexible credit requirements and a down payment of only 3.5 percent, however, a short sale home might not qualify. The FHA requires an inspection on the property before approval. Since short sales are often sold as-is, the buyer might be unwilling to pay for repairs.
Next, talk with your lender. Getting a short sale approved can take anywhere from a few weeks to a year or longer, and during the waiting period, interest rates can fluctuate. Talk to the lender about your intentions – some won’t lock in a loan rate for more than 30 days without charging you a fee, while others won’t lock in a rate at all until the short sale is approved.
Next up, pre-qualify for a loan. This is your first step in the loan approval process. When you go to get pre-qualified, the lender evaluates your credit history, income and monthly debt to determine how much you can afford to spend on a home. If you qualify, the lender will give you an estimated maximum sale price. Since it is not a firm approval, it’s a good idea to try to stay below the maximum when searching short sales.
Now it’s time to pick an agent. For non-traditional sales, it’s always a good idea to contact an agent who specializes in short sales and foreclosures. As you navigate through this process, it’s incredibly important that you have an experienced agent who can show you the property, draw up the contract, submit your offer, and negotiate with the listing agent.
Is a short sale for you? Or maybe you’re ready to view some properties? Give Metrowest a call – we’d love to help.