Attention Home Buyers!!! The 2010 Homebuyers Grants from the SRAR Board are now Available.
Attention California Homeowners Facing Mortgage Difficulties, the CalHFA "Keep Your Home" program is starting November, 2010 and will include assistance to struggling homeowners using the $700 million pledged from the US Government. This is great news to the people I am currently helping as well as future clients in need of assistance.
Helping clients who are having trouble maintaing their mortgage obligations is my specialty. Working with the lender to request all available assistance programs including the recently passed plans under the Obama Administration. With compassion, knowledge and experience, I will help you with your lender.
5 Tips for Homeowners Having Difficulty Affording their Mortgage
Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as an interest rate reduction for a set period of time, usually between 2 to 5 years. For assistance with a loan modification, it is recommended that you speak with a HUD Certified Counselor by calling 800-569-4287.
When a loan modification still isn’t enough to relieve your financial problems, a short sale is the next best option to consider if your property is worth less than the total mortgage you owe on it. You must have a financial hardship, such as a job loss, business failure, mortgage payment increase, divorce or death, illness, relocation, reduced income, mortgage fraud, predatory lending, or major medical bills.
Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional* and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest.
A qualified real estate professional can help you to determine which workout options are best for your situation and speak to your lender on your behalf. For a short sale, the home will have to be put on the market, usually for at least 60 days. Also, help you to submit a complete short sale package and help you set an appropriate listing price for your home, market the home, and negotiate a contract with the buyers that is consistent with the lender(s) approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.
Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include a hardship letter detailing your financial situation and why you need the short sale, a copy of the purchase contract and listing agreement, proof of your income and assets, and signed copies of your federal income tax returns for the past two years.
Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to several months. Some experts estimate that if you have only one mortgage, the review can take about two months and with a first and second mortgage with the same lender, the review can take about three months. With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:
- You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
- Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
- Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.
Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.
