FHA Responds To Buy & Bail Transactions
This update from Mortgagee Letter 2008-25 establishes guidelines 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 (UW's 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:
- Appraisal no more than 6 months old, or
- Original HUD-1 and current mortgage statement.
Looking to purchase a home in Greenville or Pitt County? Need a FHA mortgage?
Now it is more important than EVER to secure financing before you look at a home!