In order to qualify for a short sale, you must have suffered a hardship. Qualifying hardships typically include:
- Loss of job
- Business Failure
- Damage to Property
- Death of a Spouse
- Death of Family Members
- Severe Illness
- Mandatory Job Relocation
- Medical Bills
- Military Service
- Payment Increase or Mortgage Adjustment
- Insurance or Tax Increase
- Reduced Income
- Too Much Debt
Here are some of the difference between a short sale and a foreclosure:
- Property is sold and lender accepts proceeds as payment
- You may be released from any deficiency judgment liens filed against you
- No foreclosure reported on to credit bureaus
- Reflects on your credit reports for approximately 2 years
- FICO score may drop between 75 - 125 points
- Lender takes ownership and forces the sale of the property
- Lender has the ability to file a deficiency judgment against debtor and any other properties owned
- A foreclosure will be reported to credit bureaus
- Reflects negatively on your credit report for up to 10 years
- FICO score may drop between 200-280 points potentially causing loss of security clearances
If you're a few hundred dollars short every month, and especially if you own a one bedroom or larger, consider renting out a room in your condo. (It might remind you of being back in school!) Not an ideal arrangement, but--depending on your specific location and what you're renting out, it might bring in $600-$1,000 extra per month.
To answer your specific question, the pro of doing a short sale is that you sell your property. The cons are that the lender may not approve the sale, and the short sale will damage your credit. Tied in with the "cons," for a short sale to be approved, you need to show some hardship. That might mean a job loss, divorce, or medical bills. Just being upside down with a lousy mortgage generally isn't reason enough to get a short sale approved.
Hope that helps.
Will they even approve a short sale? If you are making payments and havent had a hardship why would they even want to do a short sale. I am seeing a number of people trying to short sale homes just because they have lost some equity. Buying a home is an investment. It is not a 100% secured investment with no chance of losing money.
If you have experienced a hardship and will not be able to pay say 3 months out, you will need to discuss this hardship with the bank and present your case.
Cons would be that they could not forgive the deficiency, it will definitely hurt your credit, and short sales can be a long and frustrating process in general waiting for 3rd party approval.
Anytime a debt is closed out and not paid in full, you are considered to have defaulted on the debt. In the case of a mortgage, this has a sever impact on your credit score. People that are saying that it will impact you for two years are not fully understanding this. What a lot of places will say is that you may be able to qualify for a mortgage again in 2 years, but you will certainly be qualifying with a very low FICO score and most likely be paying a much higher rate.
Short selling your home, like any other loan default will stay with you for 7 to 10 years. If you are delinquent on your loan prior to this, the impact can be even more severe, however he actual impact will be a factor of many things, including how good your credit is before.
Why did they not modify your loan?
In most cases to qualify for a loan mod you need to show that you have income and CAN pay some sort of mortgage.
In the case of a short sale you are trying to show that you cannot pay the payment due to circumstances beyond your control. Unfortunately having an adjustable loan does not in and of itself qualify you for a loan mod.
I would talk with a Realtor about your options, the market value of your property, etc. Develop some options. You might want to check with a CPA or an attorney if you have questions.
Usually a short sale is less harmful to your credit, but every situation is different.
If u have tried loan mod , either u learnt more than most people.
Please sit down with an expert.
We can sitdown with my broker and analyse ur situation.
703 635 8209