Your Lender Isn T Usually Your Lender

Category: Finance, Real Estate.

For a variety of reasons, it is possible that the total debt on your home may be more than what the home is worth.

Depending on how much you owe, just wait it out and the value of your home goes up. Most of the time, this isn t a problem because time is the solution. Problem solved. This solution does not work for everyone though, because some folks are stuck in a situation where they absolutely have to sell their house. Unfortunately, this could take years. This can happen for many reasons, some good and some not so good: relocation, divorce, financial hardship, death, or anything at, illness all. So what do you do?

The result is that you may have to move, but you can t sell your house and make enough on the sale to pay the closing costs. One option is to do nothing and not make your mortgage payment. Another option is something called a" short sale. " This is when you fess up to the lender, let them know about your hardship and ask them to accept less money than you owe. That s a worst- case scenario because it impacts your credit rating more severely than anything else possibly can. Of course, the lender doesn t want to do that, but they also don t want to pay all the costs of foreclosing on a home, placing it on, repairing any defects the market, and getting the best price they can in what may be a market already overstressed with excess inventory. Not always so don t get your hopes up. Lenders absolutely hate to foreclose, so they may be willing to consider a short sale.

A short sale involves a lot of paperwork, time and effort and it is best if you have a real estate agent or someone knowledgeable to help guide you through the process and give moral support. The first step is to contact the Loan Service Department of your lender. A lot of stress is involved. That number will be in the documentation you receive about making your payment. Keep copies. Use the phone and the mail. The lender will ask you to submit a financial statement.

That s just the beginning, assuming they give a tentative agreement. They want to know that you really don t have the financial assets to repay the loan after you sell the home. Your real estate agent still has to put the home on the market, and get a, find a buyer bona fide offer. This takes a while because there are several decision makers involved. Once that has been accomplished, you submit all contracts and paperwork to your lender for a decision. Your lender isn t usually your lender.

Your paperwork is submitted to the investor for a decision. They just service the loan for your actual lender, called the investor. Assuming you have mortgage insurance on the loan, they are another decision maker in the process. That way they can justify making high LTV( loan- to- value) loans. Mortgage insurance covers lenders in the case of loan defaults. If the investor and the insurer both agree, your short sale is approved, and you can sell you home.

A short sale is basically a" forgiveness of debt. " That counts as income and you have to declare it to the IRS.

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