Are You A Good Candidate For The Short Sale?

If you fear that a foreclosure is in your future, you are not alone. As a matter of fact, the number of foreclosures is at an all time high and it is speculated that the numbers will keep on climbing. Lenders are eyeing the softening real estate market, the recent bank bailouts by the FDIC, and also the losses they stand to incur if their foreclosure rates go up with weary eyes.

To counteract the potentially disastrous consequences this has for their competitive edge, lenders are more willing than ever to work with borrowers to either cure defaults or help them to dispose of unaffordable real estate via a short sale. During a short sale, the lender will accept an amount less than the currently outstanding balance of the home loan as payment in full on the debt and forgive the difference. In other words, if a borrower owes $350,000 on a property but can sell it for only $325,000, the bank will accept this payment and forgive the remaining $25,000.

To find out if you are a good candidate for the short sale option, you should contact your lender as soon as possible before an actual foreclosure takes place. Generally speaking, there are some overall qualifications you must meet before being even considered as a serious applicant for the program. Sometimes, a loan modification is the answer and not a short sale.

You must be headed toward foreclosure. You cannot apply for a short sale application unless your mortgage is seriously in arrears and the bank has notified you that a foreclosure action is going to be filed against you. Usually this takes place when you are three payments in arrears.

You must have no assets that could be sold to cure your mortgage default. If you have a pension plan or 401(k) account against which you could borrow money, you are not a good candidate for a short sale. Similarly, if you own any investments, other real estate, or any other assets that you are not using to pay your mortgage, then you will not be considered a qualified applicant.

You must be able to document your income and expenses and also your inability to pay your mortgage. Remember, the bank first and foremost wants to keep you in your home and making payments. The short sale is one of the secondary options if there is absolutely no way that you are going to be able to afford your home any longer. Be sure to have copies of bank statements, paystubs and other related documents to prove your case.

You must be willing to do whatever it takes to make your home attractive for a potential buyer. The goal is to squeeze out as much money as possible to lessen the debt the lender must write off. In some cases the lender will give you a predetermined figure the bank is willing to accept and it is up to you to make your house as presentable to buyers as possible.

You must ask for the short sale option. Unless you ask, the loan will proceed to the foreclosure option. Remember that not every applicant for a short sale will be accepted, but unless you request this option, you most likely will have to endure the blemish on your credit report.  As a side note, you might also look into credit card debt settlement as well to see if you can address your financial situation.

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