Can you qualify for a HAFA Short Sale for your home in Silicon Valley? The short answer might be no, but it requires some investigation. Despite the huge rise in home prices, 28% of home owner’s values are lower than their mortgage balance. We do meet a lot of owners whose home value’s have appreciated enough that the balance of the 1st mortgage is covered, but the 2nd loan is still under water.
For some of these home owners Short Sale is still an option, but not a HAFA Short Sale. Here’s why:
HAFA (Home Affordable Foreclosure Alternative) was introduced to help home owners with underwater mortgages. The advantage of a HAFA Short Sale is that it offers the home owners a fresh start since they can ditch their bad loan and literally buy a home that has equity. But not every borrower and every loan will qualify for a HAFA Short Sale since there are restrictions associated with the program.
HAFA guidelines which were revised in 2013 were designed to minimize the negative impact of a Short Sale on home owners credit. Let’s examine them closely:
1) Loan Balance: HAFA guidelines applies to the 1st liens with the balance NOT to exceed $729,750 for Single Family Homes. So, if your sale will cover your 1st lien amount then you will not qualify for a HAFA Short Sale. This does not help the high-end home prices in California which are above this limit, but with the median California prices at less than $500,000 the program has some merits.
2) Purchase Loan: HAFA short sale only applies to purchase loans. This means that if you have replaced your original purchase loan with a refinance then you will not qualify for HAFA Short Sale despite the fact that your current loan is under water. You will need to apply for a regular Short Sale.
3) Loan Origination Date: Your mortgage should have been originated on or before Jan 1, 2000. However, if you have refinanced your mortgage then you will not qualify for a HAFA Short Sale.
3) Property Type: Commercial properties do not qualify for HAFA Short Sale even if the loan is underwater. But both owner occupied and 1-4 unit rental homes qualify for HAFA Short Sale.
4) Short Sales Applications: If you have applied for a Short Sale in the last 12 months but refused the offer from your lender to close that Short Sale, then you can not apply for a HAFA Short Sale for until 12 month have passed from that application date. There are no exceptions to this rule, even if your loan might have been sold to a new lender.
It’s smart to contact Department of Housing and Urban Development (HUD) Home ownership Help site to see what other options are available to you. And feel free to Contact Us to see if you qualify for a HAFA Short Sale since ideal way to unload the bad debt from your credit history and move on.