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FHA new guidline for the Buy and Bail situation

By
Real Estate Agent with Coldwell Banker Residential Brokerage

 

FHA Responds To Buy & Bail Transactions

Here are some new guidelines that have been created for situations where people buy one home with the intention of defaulting on their current residence which is known as "buy & bail." These changes delineate the circumstance in which an underwriter may include the income documented from a valid rental agreement for the current residence.

Here are the 7 things you need to know about these changes:

1. This is a temporary change, and effective as of September 19th, 2008

2. The borrower must be relocating to a new job location

3. The new home must be outside reasonable commuting distance from the current residence (UWs discretion)

4. The borrower must have a fully executed lease with at least a 1 year term from the closing date of their new mortgage

5. The borrower must document receipt of the security deposit and/or first month's rent

6. Current residence must have an LTV of 75% or less

7. The value of current residence can be proved with the following:

          a. Appraisal no more than 6 months old, or

          b. Original HUD-1 and current bank statement

Comments (4)

Michael Wayne Jackson
Coldwell Banker - Novato, CA
Broker - Seniors Real Estate Specialist Novato

I think they know most homeowners don't have equity and this guideline is to their advantage.

Sep 23, 2008 05:25 AM
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Hi Stephanie, this is good information.  Basically FHA is following in Fannie's footsteps and, in most cases, eliminating buyers with existing homes buying another and renting the existing unless they can qualify for both house payments or the loan to value of their existing home is 75% or less.

Here is a link to the FHA Mortgagee Letter http://www.themtgmentor.com/FHA-Buy-and-Bail.html

 

Sep 23, 2008 05:35 AM
Paul Silver
Tiverton, RI
Rhode Island full service real estate firm

Interesting facts... I agree with Bill above... and I think for the most part this is a good thing... perhaps less buy and bail will happen now... we shall see... there are almost always unintended consequences...

Sep 23, 2008 05:42 AM
Stephanie Perrault
Coldwell Banker Residential Brokerage - Los Gatos, CA
Realtor Associate

Bill, thank you somuch to complete the information!

So much is happening right now, it's hard to keep up.

Stephanie Perrault

:)

Sep 23, 2008 06:46 AM