Confusion surrounds short sale eligibility and often leaves homeowners disoriented about the facts. Much of the confusion stems from the fact no standard protocol exists. Although Obama\’s Making Home Affordable program streamlined the process, not all lenders participate in MHA.

To obtain accurate short sale eligibility criteria, homeowners will need to speak directly to their lender. In most cases, homeowners must be on the brink of foreclosure to qualify for this option. There are certain circumstances when banks will let borrowers in good standing sell their house short of what is owed, but few people qualify.

It\’s best to put the wheels in motion at the first sign of financial distress. Obtaining short sale approval is a complicated process that can take months to complete. People often procrastinate about calling the bank when they can\’t meet loan obligations. This is a huge mistake that can cost more than having your house repossessed.

Once borrowers default on payments their account is assigned to a bank loss mitigator. Lenders initially send a Notice of Default informing borrowers of the past due amount and date it must be paid to prevent foreclosure. Anyone who has received this notice can locate their loss mitigator on the NOD document.

It\’s important to note that short sales are not offered to homeowners who have entered into foreclosure. The sooner borrowers open the line of communication, the better chance of success.

It\’s best to visit the Making Home Affordable website to first determine if the loan is serviced by a participating lender. Not only can visitors learn more about short sale eligibility requirements, they can download brochures that offer details of the process, along with obtaining information about other available programs.

Under MHA, short sales fall under the Home Affordable Foreclosure Alternatives (HAFA) program. What\’s nice about working with participating lenders is qualified homeowners are relieved of deficiency responsibility.

Short selling means that banks agree to accept less than owed on the loan. However, many banks require borrowers to repay deficiency amounts between the loan balance and short sale price. If the property sells for $25,000 less than owed, borrowers have to pay the bank the difference.

Most homeowners can\’t afford to pay the full amount, so banks issue judgments that remain on credit reports until the debt is paid. This can harm credit scores and prevent borrowers from qualifying for credit.

Unfortunately, even if homeowners meet requirements there is no guarantee that banks will enter into an agreement. It is not uncommon for banks to attempt other strategies to help keep borrowers in their home. These might include loan modifications or refinancing mortgages.

If short selling is the most viable option for banks they will provide homeowners with required application documents. The process can be grueling, so it is smart to organize financial records, loan documents, insurance policies, and tax returns.

Banks are notorious for losing documents throughout the process. It will be helpful to keep record of every document sent, along with copies of email correspondence, or logs of phone conversations.

Homeowners who find the process confusing can seek help through HUD housing counseling. Counselors can help borrowers file required applications and provide advice regarding the short sale process.

If borrowers do not meet short sale eligibility requirements, they might qualify for a deed in lieu of foreclosure. This option involves returning the property to the lender in exchange for not having to endure the foreclosure process.

Author Bio: Simon Volkov is an active real estate investor and author of \”Short Sale Hardship Letter eBook Course.\” He has written extensively about Making Home Affordable and short sale eligibility requirements, along with foreclosure alternatives at www.SimonVolkov.com.

Category: Real Estate
Keywords: short sale eligibility, making home affordable, real estate short sale, deed in lieu of foreclosure