7 Things you need to know about FHA Announcement

This update establishes guidelines for situations where people buy one home with the intention of defaulting on their current residence, which is known as “buy & bail”. These changes delineate the circumstance in which an underwriter may include the income documented from a valid rental agreeement for the current residence.

Here are the 7 things you need to know about these changes

• This is a temporary change, and effective as of September 19, 2008.
• The borrower must be relocating to a new job location.
• The new home must be outside reasonable commuting distance from the current residence (UW’s discretion).
• The borrower must have a fully executed lease with at least a 1 year term from the closing date of their new mortage.
• The borrower must document receipt of the security deposit and/or first month’s rent.
• Current residence must have an LTV of 75% or less.
• The value of current residence can be proved with the following: appraisal no more than 6 months old, or original HUD-1 and current bank statement.

This is a Fannie Mae guideline and Freddie Mac will soon follow. If you are in Gwinnett County and are in this situation, give a mortgage professional a call.