What does it mean to be delinquent on your mortgage?
Do I need to be behind on my payments to do a short sale?
These are some of the most frequently asked questions of people weighing their options. Most homeowners when they run into issues with their mortgage try to do what they think is the right thing by dipping into savings and retirement accounts to keep up with the payments. Eventually the math catches up to them and they are faced with the reality that this is not a sustainable course of action and face a potential foreclosure.
Let us start by saying no one can tell you to stop making payments to a creditor or purposely default on a payment arrangement whether you can afford it or not. What we can tell you is that there are very few situations where a mortgage company will allow a short sale if you are current on your payments. In our experience we have only seen 2 scenarios where a homeowner was able to short sell their home without being in default of their mortgage.
The first scenario was a Military Transfer or "permanent change of station" hardship. Essentially a member of our military has to relocate and has no choice but to do so. Even in this case the mortgage company will attempt to decline and some heavy lifting needs to be done in order to help out the very people who keep us safe.
The only other situation we have seen had to do with a borrower having top secret clearance and a forced relocation. In that scenario the borrower had to bring significant cash to the table in order to facilitate the sale.
Think of it through the eyes of the mortgage company; Why would they entertain a situation where they take a loss if you would continue making payments regardless of their willingness to help you or not.
We have a simple case study of a past client that I can share to help paint a picture of what typically happens when a borrower who is current on their mortgage attempts a short sale.
The borrower, we will call him John, had to sell a house as a result of a divorce settlement. The mortgage was approximately $400,000 and the sale price was $300,000. John could technically afford to make the payments but was dipping into his retirement and future stability to keep things going. When we submitted the offer and short sale package to his lender he was current on his payments. After a few weeks the lender responded that they would allow the sale IF, John wrote a check for $140,000 at closing. If you have been following along they actually wanted MORE than the difference even after closing costs which even to this day confuses us. John picked up on what the mortgage company response was telling him pretty quickly. 60 days later we submitted the short sale package again after John missed a payment and was considered to be in default. A few short weeks later the mortgage company responded stating that they would accept the short sale if John would come to closing with $3,500 to contribute to the mortgage company loss.
For many, missing any payment is a huge stress inducer and goes against what you consider to be "the right thing". All we can tell you is that your mortgage company is not your friend. These are the same people who created this crisis that many homeowners just like you have had to live with for years.
Please contact us for your free consultation so that we can discuss your options and to see if a Short Sale can help you handle your mortgage problems.