Short Sale Eligibility
To fully explain short sale eligibility would almost require a book. The only established criterion is Home Affordable Foreclosure Alternative (HAFA) short sale program offered through U.S. government. All other programs requirements vary by lender.
HAFA short sale eligibility encompasses multiple factors. However, meeting each of the factors does not guarantee acceptance into the program. Instead, final decisions rest with the mortgage service provider.
Basic requirements for obtaining short sale approval under the HAFA program include:
1. Living in the home within the previous 12 months.
2. No real estate purchases made within previous 12 months.
3. Principal balance of first mortgage does not exceed $729,750.
4. First mortgage taken out prior to January 1, 2009.
5. Ability to provide documented financial hardship.
6. Property owner never convicted of certain types of felony crimes within the last 10 years.
It is important to understand that short selling real estate does not guarantee mortgagors won't be held financially responsible for remaining loan balances. Many lenders require borrowers to pay the difference between their loan balance and purchase price. This can be a devastating blow for those attempting to avoid foreclosure.
The majority of mortgagors cannot afford to repay thousands of dollars against property they no longer own. If banks issue deficiency judgments borrowers could be subjected to severe credit damage that takes years to recover from.
It is wise to obtain legal counsel before entering into a short sale agreement. Lawyers can sometimes negotiate a 'Payment in Full' satisfaction that releases borrowers from deficiency amounts.
Lawyers can also advise homeowners if a deed in lieu of foreclosure is better suited for their specific situation. While short sales involve locating a qualified buyer to purchase the home, deed in lieu requires borrowers to return their home to the servicing lender.
Just as with real estate short sales, lenders can hold borrowers accountable for deficiency amounts, but oftentimes accept return of the property as payment in full. The only way to know if your property qualifies for either foreclosure prevention remedy is to contact your lender.
If your property is eligible for short selling your lender will require a financial audit to verify financial hardship. Banks require borrowers to submit a variety of financial records including wage earning records, bank statements, and tax returns along with a short sale hardship letter.
People often fail to understand the importance of the hardship letter. This document provides borrowers the opportunity to plead their case for financial relief to the lender. It is crucial to craft a well-written letter that provides a timeline of events leading to financial distress, along with actions taken to remedy money problems.
If you need to write a letter of hardship to obtain short sale approval you may find the information provided at "Crafting the Perfect Short Sale Hardship Letter" to be beneficial.
If you are in need of foreclosure prevention help the Department of Housing and Urban Development offers complimentary housing counseling. Another option is HopeNow.com; an alliance between borrowers and lenders that offers help to borrowers wanting to stay in their home.
We extend an invitation to browse our real estate short sale article library which covers a variety of foreclosure prevention programs and provides additional information regarding HAFA short sale eligibility requirements.
Published on March 09, 2011 at 03:54 AM | Comments: 1