Q: I am interested in buying an FHA short sale. I’ve heard they can be tough. Do you have any advice? Travis in Renton, WA
A: My advice can be summed up in two words: Buyer beware. In a non-FHA short sale, the lender’s approval process can be quite lengthy. With an FHA loan, the federal government is the investor, and the wheels of government move very slowly. It’s not unusual to wait 9 to 12 months for a decision on an FHA short sale offer. It’s a rare buyer that has that level of patience and flexibility. There are also a number of stipulations that the FHA imposes on short sale purchases:
- The home must be owner-occupied.
- The buyer’s closing cost credit cannot exceed 1% of the purchase price.
- The second lien holder is only allowed to receive $1500. As a result, if there is a second lien the chances that the deal will close are very slim.
All that said, if you love the house and are willing to accept all the criteria – and the property only has one mortgage – go ahead and proceed. Just be ready to be patient.