Despite the recent rise in home prices, some families in San Jose, Campbell, Saratoga and Los Gatos still have underwater mortgages that need to be rescued.
1) What is a Short Sale: Short sale is when a property is sold for less than the sum of all the loans on the property. The lender has to agree to accept less money from the borrower.
2) Short Sale Qualification: We have written blogs about Short Sale qualification, but suffice it to say that the home owner has to provide financial hardship which is preventing him/her from making monthly payments on the home mortgage.
3) What is acceptable financial hardship: You can’t include your plans for a European Cruise as the justification for Short Sale and believe me some home owners have listed vacation plans as the cause of their hardship. But generally these are the conditions that justify hardship:
- Deal of a borrower/co-borrower
- Major illness: Any illness that limits the families ability to generate income
- Unemployment: If you are unable to find a job and have been unemployed for a while, then you have the right justification to apply for a Short Sale.
- Disaster: Natural disaster like earth quakes and hurricanes that have damaged your home can be justification for Short Sale.
- Divorce: If you are getting a divorced which will eliminate one borrower’s income contribution towards the mortgage payment.
4) Costs associated with Short Sale: The selling banks will determine what commission your selling agent will receive and for the most part the home sellers don’t have to pay any out of pocket expenses. But there are exceptions since the banks will not pay past due condo association fees and utility bills on your home.
5) What is a Loan Servicing Company: Loan servicing company is an entity that is responsible for managing the collection of payments and escrow on your home. This company acts on behalf of the investor or lender who holds the Mortgage Note on your home. Most major lenders do service their own loans, but smaller lenders often use service companies as well.
6) How long does a Short Sale take: Depending on the number of loans, it takes anywhere from 30-60 days for most Short Sales to complete. But if you have a qualified agent who has done Short Sale with major banks, they will know how to get the approval done quicker. Our last Wells Fargo Short Sale was approved within 14 days after the Asset Manager ordered an appraisal on the home.
7) Loan Status: The borrower does not have to be late on their mortgage payments to apply for a mortgage. After all, most homeowners exhaust their whole savings before they stop making their house payment. Even if you have been able to make online payment on your mortgage and you are not late, you can still apply for a Short Sale.
8) Credit Score impact: If you file for a Short Sale, there will be a reduction in your credit score, but most lenders these days are reporting a loan involved in the short sale as paid in full which should minimize the impact on your FICO score. In fact, there are now lenders who will give you a new loan 1 day after you have completed your Short Sale.
9) Keeping it in the family: It’s illegal to sell your home in a Short Sale to another family member. That’s considered a non-arms length transaction which is illegal in all States.
Feel free to Contact Us if you have more questions about your option to Short Sale.