How Do I Qualify For A Short Sale?
What are the Qualifications for a Short Sale
Many homeowners facing a foreclosure just may not know what the qualifications are for a short sale. A number of these homeowners think the process is too difficult, time consuming, or that they can’t qualify. Contrary to these however, the requirements or qualifications are easy to meet and are generally the situations that put homeowners near a foreclosure in the first place.
What is a Short Sale?
Before seeking what are the qualifications for a short sale, a homeowner should first understand what a short sale is. A short sale is basically one of the options available for homeowners wanting to avoid a foreclosure. The complexity of the whole process lies on the ‘short’ of the sale that will be enforced on the property. Simply put, you will be selling your home for less than the mortgage amount in this strategy to avoid a foreclosure. But in order to sell your home ‘short’ of its mortgage, you should have good reasons to; you should be qualified. And these qualifications are usually set by lenders.
What are the qualifications for a short sale from a private lender?
Your current lender has the final decision in granting you a short sale. For you to qualify for the program if your mortgage is under a private lender, here are the conditions that should be met.
Decreased home value
One of the strong reasons a homeowner can use to make the lender agree to a short sale is a decrease in home value. Specifically, the decreased home value should be lower than the mortgage. Because no lender would naturally agree to a short sale if the home can be sold more than the amount of the mortgage; home values are the determinants of price that prospect buyers will be willing to pay. Therefore, a homeowner should ask a real estate professional for a quote or comparative market analysis. If the result of the analysis is a home value larger than the mortgage, then the short sale is not necessary.
A destitute circumstance of the homeowner
Another good reason for a lender to approve a short sale is a destitute circumstance or hardship that restrains the homeowner to meet monthly payments. This circumstance should be explained in a letter called the Letter of Hardship. A few of the acceptable hardship conditions include death of the homeowner or family member, sickness of the homeowner or family member, bankruptcy, divorce, unemployment and decrease of income.
Being unhappy with neighbors or having made a bad purchase decision with the said property does not constitute a hardship.
No other assets to pay off the mortgage
The homeowner will also be required to submit proof that he or she has no other assets that can be used to pay for the payments in default and future payments. A statement of assets and liabilities supported by pay slips, income tax returns, non-cash investments and bank statements are usually enough supplement to the claim of no asset availability. To qualify for a short sale, total liabilities should be more than the net assets. Therefore, you should have a negative figure on the bottom of your statement of assets and liabilities. If not, a lender might point out other options in order for you to pay your mortgage; For instance, sale of non-cash investments or other real estate.
What are the qualifications for a short sale under HAFA?
A short sale can also be backed by a government program called Home Affordable Foreclosure Alternatives or HAFA. It is under the bigger program 
called Making Home Affordable Program initiated by President Obama. Compared to short sale alternative from a private lender, HAFA offers several benefits such as lenders receiving 6% on the loan balance or a maximum of $ 6,000 and sellers or homeowners receiving a relocation assistance of up to $ 3,000 which will be put on escrow until the sale is closed.
So what are the qualifications for a short sale under this program? They are:
-Property should be personal residence; currently occupied by the homeowner
-The unpaid mortgage amount should be no more than $ 729,750 for a single unit; other limits are set for other types of homes
-The homeowner should be in default or is about to be in default of several monthly payments
-Mortgage was taken before January 1, 2009
-Homeowner should be in a hardship situation
Apart from these requirements, a homeowner or seller must also be rejected by the Home Affordable Modification Program or HAMP which covers loan modification. Therefore, a homeowner should have first applied for a loan modification under the HAMP. Requirements for HAMP are the same with HAFA but with the addition of: mortgage payments should not exceed 31% of homeowner’s monthly income.
Additionally, when applying for a short sale through HAFA, a homeowner needs to check if his or her mortgage lender participates in the program. Otherwise, a short sale under the private lender is the only option available.
When faced with a foreclosure, a short sale is one of the best options that a homeowner should look into. It might be a lengthy process but it can be
possible with the right assistance from a real estate professional and knowledge of the whole process. However, seeking this option starts with knowing the qualifications for a short sale. I encourage you to speak with a Short Sale Specialist Realtor in regards to any questions your may have about the short sale process and how you can qualify! Contact us now!
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www.Short-Sale-Specialists.com
877-737-4903
Ask a local short sale specialist!
Are you looking for a Baltimore MD short sale Realtor? Look no further! Our stop Maryland foreclosure specialists provide FREE short sale expert services to Baltimore homeowners in hardship. Call today to see if you qualify for a short sale! Need a Baltimore Distressed Property Expert in short sales to offer free broker short sale services? Our Baltimore MD area Distressed Property Expert real estate agents are here to help, and are Certified or trained in the Maryland Home Affordable Foreclosure Alternatives, or HAFA Government short sale program.
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