Selling your home when you owe too much on your mortgage

August 21, 2010 · Print This Article

Want to sell your house but you owe too much on your mortgage?

I meet dozens of homeowners each month that are either behind on mortgage payments, or will be soon if their financial situation does not get better. The ever increasing taxes on homes are also making it harder for homeowners to keep current with their mortgage payment. These people would love to sell their home (they need too) but they can’t because they owe more then the home is worth. This type of homeowner is the ideal candidate for a short sale and there are hundreds in this area that should consider it.

A short sale is an agreement in which your bank agrees to accept a payoff on the loan for less than what is owed. Short sale provides a way for troubled homeowners to prevent foreclosure and many of the dire penalties involved. An example is a homeowner who has a $500,000 mortgage but the home is only worth about $375,000 in the current real estate market.

There are certain criteria to qualify for a short sale; you cannot do a short sale just because your house is worth less than you paid for it.

You must be in default or close to being in default (missing a mortgage payment). In the past a homeowner would have to be in default by at least 3 months to qualify for a short sale but today some lenders are willing to do a short sale if the homeowner is in distress and close to being unable to afford the next mortgage payment.

You have to show proof by using comparable home sales that your mortgage balance is more than what your home is worth.

The homeowner must prove they are in financial distress and submit a short sale hardship letter explaining why you can no longer make the mortgage payments. Hardship examples include loss of job, health problems, bankruptcy, death and divorce.

You will also have to show that you have little or no assets that you can use to pay off your mortgage.  You will provide bank statements and if you have a job recent pay stubs as well as the past 2 years tax returns. These items will help prove to the bank that you have a financial hardship and may have had one for sometime now. The last thing a bank wants you to do is walk away from the home and let it go to foreclosure. That is also the worst thing you should do as a foreclosure would wreak havoc on your credit as well as a possible law suit or wage garnishment where the bank can force your employer to deduct money from your pay check.

During a short sale the homeowner is allowed to stay in the home until it is sold, it could take 6-12 months from the start to the end of the short sale. The homeowner will not get kicked out of the home like a foreclosure and is able to stay until the home is sold. Just try to maintain your home as best as you can during this time to have a better chance of a successful short sale.

If you feel your financial situation is such that you need to sell your home but you can’t and you want to see if you qualify for a short sale call me at 914-403-4868 or email me at info@PutnamWestchesterShortSales.com.

For more info on the short sale process please visit PutnamWestchesterShortSales.com

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