There are many different types of loan products available to buyers today when they are purchasing property. The differences really don't matter much UNTIL the loan goes into default. In this section we will cover the different loan types and the differences when doing a short sale.
Conventional Loans
These are the bulk of the lending market and probably the most difficult to negotiate. The BPO or Appraisal in a short sale is the most crucial part of the negotiations with these loans. Usually the lenders will take anywhere between 80-100% of the BPO value.
FHA Loans
FHA loans are funded by conventional lenders but are insured by FHA. The payoff to the lender on a short sale must be 82% of the appraised value.
VA Loans
VA loans are funded and guaranteed by the Veterans Association and conventional lenders. The payoff to the lender on a short sale must be 88% of the appraised value.
Freddie Mac
These loans are funded by conventional lenders. The payoff to the lender is usually around 92% of the appraised value. Note that the end buyer cannot be a Corporation, LLC, Trustee or an entity of any kind.
When making your offer on FHA, VA, FNMA and FDMC loans you will probably have to negotiate with the mitigator to meet the minimum guidelines. Very rarely do you get approvals less than these preset percentages and remember it is the PAYOFF, not the contract price.
To your continued success.
Kathy Morris
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