When a property is sold for less than the balance remaining on the mortgage loan, that is called a short sale. A short sale can benefit homeowners in many ways, by helping them get out of an upside-down loan, avoid foreclosure and eliminate their mortgage debt. Short sales today are also, on average, taking less time to process than before – thanks to tighter regulations and better practices in the industry. However, there are still a lot of misconceptions about short sales floating around out there, and we are tackling eight of them to help homeowners in the market to short sell know what the real deal is!
Myth Number One: I will still be responsible for paying off the total amount of the mortgage after a short sale.
Wrong! If your short sale is handled correctly, and you only hold one mortgage on the home, your specialist should be able to negotiate a short sale that leaves you free and clear of the debt as far as the lien-holder is concerned. The whole goal of the short sale process is to get the bank to agree to accepting a lesser amount than the total mortgage due and calling it a day!
Myth Number Two: I can’t qualify an investment property or second home for a short sale.
Wrong! As long as you meet eligibility requirements, your second or investment home could still be eligible for a short sale. This is why you need a short sale specialist – so you can be better informed about what is and is not possible with short sales!
Myth Number Three: I’m not behind on my mortgage payments, so I’m not eligible for a short sale.
Wrong! Whether or not you are behind on your payments isn’t the criteria for determining if you qualify. The main factors in the decision are your basic eligibility, whether the home is your principal residence, and your debt to income ratio (which must be greater than 55 percent).
Myth Number Four: I won’t qualify because my lien holder has ultra-strict guidelines on short sales.
Wrong! EVERY borrower is eligible to be considered for a short sale – as long as they meet eligibility requirements. More and more loan servicers are able to make independent decisions without having to seek a lengthy separate review from the mortgage insurance companies. This freedom and increased authority on the part of mortgage holders is resulting in more short sales being approved than ever before, especially for people undergoing financial hardship!
Next week, check in to see more myths about short sales debunked!