Question 4- Is the current loan on the home FHA or Conventional?
This blog and real estate video series is for all home buyers considering the purchase of a short sale. You can consider it a short sales for beginners blog. This series should not be confused with the process of making an offer on a foreclosure.
The importance of this question is again to gather more information with regards to where the process of the short sale is at. It will also help you to gauge home much extra time the short sale may take. How this works is it starts with the banks procedure of processing a short sale. Many banks want all of the seller information ahead of time if the loan is an FHA. They have a different way of processing it and paperwork to fill out. they will go over all of the documentation to determine if the seller should go through the loan modification process first. Then they will move it to the short sale department.
So it doesn’t matter if you have an offer in, the process is the same. If you can find a short sale that this step has already been done, the bank will have saved to ninety days or more for you when waiting on an answer. Either way a listing agent should always send in as much information as they can ahead of time to get the process started. Most banks will start to process it once they receive it, so it never hurts to be proactive.
The situation you are looking to avoid is one where the listing agent says that they have no idea what type of loan the seller has and worse yet is unwilling to find out for your agent. If the listing agent says that they have not sent any paperwork in and they are waiting for an offer, run for that situation! All of the 10 questions play a very important role in helping you decide on a home to buy but so much of this process depends on the listing agent to be proactive.
The other part of this to be aware of is if the seller has a FHA loan on the home and you as a buyer plan to use an FHA loan to buy the home, many times the lender will only allow 1% in seller paid closing costs. If you depend on that for your purchase it could mean you will have to come up with the difference for the closing costs.