Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans foreclosure, short sales

Don’t Let a Short Sale Keep You From a New Mortgage | Consumer Information

Don’t Let a Short Sale Keep You From a New Mortgage | Consumer Information.

July 26, 2013

by

Colleen Tressler
Consumer Education Specialist, FTC

If you negotiated a short sale of your home, you may be surprised to learn that some mortgage loan underwriting systems can’t distinguish short sales from foreclosures on consumer reports. And that may keep or delay you from getting a new mortgage.

You see, borrowers who go through a foreclosure typically have to wait seven years before they’re eligible for a new mortgage. But short sellers may qualify in as little as two years. When you’re trying to buy a new home, an additional five years can seem like a lifetime. So is there anything you can do to improve your financial footing? You bet there is.

  • Get a letter from your lender confirming that your loan closed in a short sale, not a foreclosure. Send a copy of the letter to each of the nationwide credit reporting companies: Equifax, Experian, and TransUnion.
  • Order a copy of your credit report. Make sure the information is accurate. If you find a mistake, contact the credit reporting company and business providing the information to correct the error.
  • When you’re ready to buy another home, get pre-approved for a loan. A pre-approval letter from a lender shows that you are able to go through with a purchase. Pre-approval is not a final loan commitment; it means you met with a loan officer, your credit report was reviewed, and the lender believes you can qualify for a specific loan amount. This pre-approval process allows your lender to identify issues and errors in your credit report that may keep you from qualifying for a loan. That, in turn, allows you to correct inaccuracies before they can prevent you from buying another home.
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Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans disability income, ssi income disability

Documenting Disability Earnings as Stable Income

Documenting Disability Earnings as Stable Income.

 

Documentation Requirements for Income from the Social Security Administration

(SSA).

Purpose This Mortgagee Letter (ML) clarifies guidance on documentation requirements for

different types of SSA income used for income qualification purposes. This ML is

provided in response to requests for clarification on this issue.

Effective Date This ML is effective immediately.

All income from the Social Security Administration (SSA) including, but not limited to, Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), and Social Security Income, can be used to qualify the borrower if the income has been verified, and is likely to continue for at least a three year period from the date of mortgage application.

The lender must verify income by obtaining from the borrower any one of the following documents:

Federal tax returns; the most recent bank statement evidencing receipt of income from the SSA; a Proof of Income Letter, also known as a “Budget Letter” or “Benefits Letter” that evidences income from the SSA (Please visit http://www.ssa.gov for an explanation of types of letters issued by the SSA); or a copy of the borrower’s Social Security Benefit Statement, SSA-1099/1042S.

In addition to verification of income, the lender must document the continuance of this income by obtaining from the borrower (1) a copy of the last Notice of Award letter which states the SSA’s determination on the borrower’s eligibility for SSA income, or (2) equivalent document that establishes award benefits to the borrower (equivalent document). If any income from the SSA is due to expire within three years from the date of mortgage application, that income may only be considered as a compensating factor.

Documentation Requirements for Income from the Social Security Administration (continued)

If the Notice of Award or equivalent document does not have a defined expiration date, the lender shall consider the income effective and likely to continue. The lender should not request additional documentation from the borrower to demonstrate continuance of Social Security Administration income. Under no circumstance may lenders inquire into or request documentation concerning the nature of the disability or the medical condition of the borrower

Note: Pending or current re-evaluation of medical eligibility for benefit payments is not considered an indication that the benefit payment is not likely to continue.

Note: An initial Notice of Award letter (or its equivalent) may specify a start date for receipt of income in the future. Lenders may consider this income as effective income as of the start date specified in the Notice of Award Letter. The borrower must have other income to qualify for the mortgage until the start date for receipt of income.

Note: Other forms of long-term disability income (such as worker’s compensation or private insurance) may be considered qualifying income with a reasonable expectation of continuance. Lenders should use procedures similar to those noted above to verify such income.