Short sale is preferred by most banks in this day and age over foreclosures because, it enables them to put the house back on the market quicker and the short sale process also leaves less damage on the home owners credit report. Here’s how to get your short sale application approved by your lender.

Step 1 – Fact Finding

The first step to getting your short sale approved is fact finding, you should find out if they will even accept a short sale because, some lenders might not. You should also find out if your bank or lender will pay you cash to short sale your home because, lenders like Chase and Bank of America are paying homeowners up to $35,000 dollars to short sale their homes.

To get in contact with your bank you should contact their loss mitigation department, if you’re unable to find this number you can easily find it online or by calling the 1-800 number for your banks main branch.

Step 2 – Documents Needed

The next step to the short sale process is collecting all of the required documents for your short sale, these documents generally includes the following:

• Hardship letter – You will have to personally write this letter and describe your situation right down to how hard you’re working every day just to pay your mortgage and put food on the table. Your hardship letter should be easy enough for any high school kid to read but descriptive enough for your lender to understand the gravity of your situation.
• Financial documents – This is the core of your document package, your financial documents should include two year’s worth of income tax returns, paycheck stubs from your work, bank statements and records for any other sources of income that you might have.
• Photos – If your home is worth less than what you’re paying for it due to damage, taking photos of the damage is your chance to prove your case. Don’t hesitate to take plenty of photos and even video to submit with your package because, this will help you prove your case.
• Home records – Last of all you will need records that show your listing agreement and title report.

Once you’ve collected all of the required documents, take an hour and review all of your documents again because, if you submit incomplete documents your short sale can be easily rejected by your bank so it always pays off to check and double check documents before you submit them.

Step 3 – Hire a Short Sale Real Estate Agent

Although there may be lawyers who claim to be experts at short sales it always pays off to hire a real estate agent who is experienced in strategic short sales. When you find an agent one of the main questions you should ask is “how many short sales have you closed in the last year?” their answer to this question will let you know if they are an agent that you want to hire or not. You should also ask them if they’ve gone through any special training on short sales and most important of all, ask them for references for clients that they have helped in the past.

Step 4 – Find the Middle Ground

Price is the biggest factor in the success or failure of short sales because, if your price is way too low, your short sale will not be accepted but if it’s too high, it won’t get any offers either so you and your listing agent will have to agree on the middle ground where pricing is concerned.

The average lender is looking for a short sale that will net them at the very least 82% of the market value for the home.

Step 5 – Wheel and Deal

If your home has either a home equity loan or maybe a credit line from a bank that’s not the primary lender, you should contact that lender right away to make sure that they will accept your short sale.

Some lenders will stand in a home owner’s way if the home owner owes them $10,000 dollars or more and to avoid this happening to you it’s best to contact the lender and arrange a deal like: short pay. What is a short pay? It’s an arrangement that your short sale specialist will negotiate which states that you will agree to pay back some or all of what you owe to the lender as a personal loan that’s unsecured.[LC1]

If the secondary lender imposes a lien you could try working out a deal and offer them $2,000 dollars or more from the primary lender if they will agree to lift the lien. This doesn’t always work though because; most secondary lenders will demand at least 5% from the proceeds that result from the short sale of your home. To insure that you’re able to successfully avoid any liens from the lender you should hire a qualified short sale specialist. [LC2]

The most important thing that you should do is arrange the best deal possible so you can keep all lenders satisfied and push the short sale forward.

Step 6 – Pick a Great Buyer

Not every buyer will qualify to buy your home. You should choose a buyer who is the strongest candidate out of all potential buyers, they should be able to offer a good sized down payment, a pre-approved mortgage and the buyer must be willing and capable of waiting for a possible prolonged waiting period for lender short sale approval.

Step 7 – Submit Your Deal

If you’ve followed all of the steps in the article correctly and made sure that you’ve submitted your short sale with all of the proper documents, your short sale should be approved in as little as two months.

While you’re waiting for approval make sure that you’re always on “stand by” just in case your realtor calls you requesting more documents or information because, if one document is missing that can result in the delay of your short sale or disapproval.

Thank you for your request. One of our professionals will contact you within 24 hours.

The great thing about a short sale is that it’s not the end of the world and your credit can be re-built if you use the right strategy to recover and get your credit back on track.

Confirm How Your Short Sale Ended

Before moving forward after your short sale it’s important to know how your short sale ended. Even though a typical short sale will allow you to walk away from your home without having to worry about paying the remaining balance on your mortgage it’s important to confirm that your bank has agreed to this arrangement because, some banks will still hold the borrower liable for the balance on their home even though they successfully went through the short sale process.

Know where you’re at

The next step to successfully re-building your credit after a short sale is knowing what you stand financially right now. You can get a clear financial picture by first obtaining copies of your credit reports from the three major credit  bureaus; Equifax, Trans Union and Experian.

Once you’ve pulled your credit reports it’s important to immediately notify each credit reporting agency if there is any negative or outdated information on your credit reports, this includes notifying each creditor reporting agency when your short sale has completed so that your old home loan no longer shows as delinquent on your credit report.

Create a Budget

Part of rebuilding financially is creating a sound financial budget so you don’t make the mistake of falling back into the same financial hole that led you to short sale your home in the first place. Your budget should be a complete accounting of your current income and bills. All bills should be paid first and on time; this includes rent or a lease for the property that you’re currently living in now.

If you find that you don’t have any income left at the end of the month after paying bills and basic living expenses then it’s time to re-adjust your budget and start cutting back on unnecessary expenses like: entertainment or travel costs.

For example: many people have a cable television service plus multiple video on demand services and all of these services can cost the average consumer hundreds of dollars per month. To save money, the average consumer who has multiple entertainment services should consider cutting one or two of them and use the internet plus their video on demand service to watch the content of their choosing.

In terms of travel costs, not everyone can afford to not commute or travel, but in larger cities that have good public transportation systems, it’s wise to consider taking the bus at least once a week, or carpooling because, both of these forms of transportation will save the wear and tear on your vehicle plus save you a $50 to $100 per month off your gasoline costs.

Use Credit Cards Wisely

Credit cards can be a successful tool for rebuilding credit if wise purchases are made and paid off every single month. If you just went through a short sale, you should avoid making any major purchases like: new cars, expensive electronic equipment or taking a lavish vacation for at least one year because, the first year after short sale should be spent saving money, budgeting and wisely spending your money instead of falling into the same financial hole that led you down the short sale path in the first place.

Read the Fine Print

People who are rebuilding their credit after a short sale, foreclosure or bankruptcy all face one common problem: predatory lenders. These lenders will typically try to make a borrower who is recovering from a financial disaster; pay a lot more than people who have good or perfect credit. You can save yourself a lot of time and hassle by simply reading the fine print of a loan document or credit card statement to avoid getting into a deep financial hole due to choosing the wrong company to rebuild your credit.

Dig In and Be Patient

Rebuilding your credit after a short sale can be a frustrating process and it’s something that does take time. You should be prepared to invest at least the next seven years of your life rebuilding your credit and getting into the same financial shape that you were in before your short sale. Many credit industry experts agree that the more time that passes after a short sale, the better and with sound financial management you should be able to get your finances back into good shape and enjoy the same lifestyle that you enjoyed before your short sale.

Here are a few steps you need to follow to apply for an FHA mortgage after a short sale:

1. Make sure you give at least three years time after short sale to submit your application for an FHA mortgage. In case, you missed or defaulted on a few payments that paved the path for foreclosure, you need to wait for three years in order to apply for this loan. However, borrowers who managed to make timely payments before the short sale can qualify for a mortgage with ease.

2. You need to provide a reason why you opted for short sale, you can obtain mortgage loan if you have a valid reason. The lender may acknowledge your short sale if you provide valid reasons like loss of employment, divorce, death of breadwinner, illness and relocation.

3. If you have high credit score, then you can get a mortgage loan after short sale. Therefore, after short sale make sure you start repairing your credit score to apply for a mortgage with ease. Make sure you have credit score more than 620 in order to get mortgage loan with ease. So, try to pay off your credit card balance in order to improve your credit report after short sale to get an FHA mortgage.

4. You can qualify for an FHA mortgage if you’re employed for at least two consecutive years. Try to provide your pay stub in order to provide evidence that you’re employed. If you can give evidence that you managed to earn for at least 24 months, then you can qualify for an FHA mortgage. You’re required to provide copies of W-2 statements and tax forms.

5. You can make a down payment for a new mortgage loan to the lender. When you apply for an FHA loan you need to make down payment between 3.5% to 5% percent of the purchase price.

Therefore, you’re required to keep the above mentioned points when you’re planning to apply for an FHA mortgage after short sale.

Freddie Mac, Mortgage Insurers Make Short Sales Easier To Process Starting November 1, 2013

Read more here: http://www.sacbee.com/2012/10/31/4951355/freddie-mac-mortgage-insurers.html#storylink=cpy

The Statistics Don’t Lie

Due to the economic recession, short sales are up especially in areas that have been hard hit by the drop in the housing market. Many homeowners who can no longer afford to stay in their homes have let their homes go into foreclosure and this isn’t always the best route because, foreclosure leaves a homeowner with nothing and a longer waiting time to get their credit back on track. With short sales, the home owner can sometimes get paid by their lender to short sale (depending on lender) and only has to wait two to four years until they can buy another home.

You Are Being Responsible

By choosing the short sale option you are being responsible by choosing to be proactive about your financial situation. Banks like short sales more than foreclosures because, a short sale will enable them to get the home back on the market quicker and it takes less of a toll on the home owner’s credit rating.

Short sales have also been known to reduce a lenders loss by as much as 20% or more so this means that as a home owner who is considering the short sale, you’re actually doing your part to help the economy and the housing market.

Bank owned properties (foreclosures) typically sell for a lot less than a short sale. Typical foreclosures can sell for up to $100,000 dollars less than a short sale because, homes that are foreclosures are typically poorly maintained by the banks and smart buyers know that they are able to purchase those homes for a lot less than they are worth.

How to Get Your Short Sale Approved

• Hardship Letter – The most important part of your short sale application is the hardship letter.

This letter will give you the opportunity to state the facts and tell your lender what your financial situation is really like. For example: don’t hesitate to be descriptive and tell them how you got into your financial situation, what you’ve tried to do to fix it and how hard you’re working to pay your mortgage while sacrificing time with your family etc.

• Financial Information – Your short sale application should also include two years-worth of the following: bank statements, tax returns, W2’s, financial statements and records for any other investments or income that you might have.
• Real Estate Agent – Hire a real estate agent who specializes in and has lots of experience with strategic short sales. This step will save you a lot of time, money and hassle of going through the short sale process all by yourself.
• Financial Management – During and after the short sale process, you should practice should manage your finances well and not over spend money on things like luxury items or expensive electronics that you don’t need right now. This step is important because, your lender will be monitoring your credit report/finances and if they see that you’ve been spending a lot of money recently on other items, when that money could have been spent on your mortgage they can go after you for the short fall or balance due after you’ve gone through the short sale process.
• Payments – Depending on your situation, you should try to stay no more than three payments behind on your mortgage. This step will show your lender that you are experiencing real hardship due to your mortgage.
• Stay in your home – The average home will typically sell faster if it’s fully furnished because; a potential home owner can visualize their family living in that home. If you decide to move out before the short sale process if completed you should make an effort to keep your yard well maintained and the utilities turned on because, this will help it to sell quicker than a home that has been vacant and not maintained for months.

Short Sale Waiting Time

Depending on situation, your short sale could be approved in as little as two months but, if you have more than one mortgage on your home and or lines of credit, the short sale process could take longer to be approved.

During the time that you’re waiting for approval on your short sale you should prepare buyers for the waiting process and make sure that any buyer who expresses an interest in your home is pre-qualified with their bank for a mortgage of their own.

What Happens After The Short Sale?

Don’t be surprised if your bank goes after you for the remaining balance due or short fall once your short sale is approved. This typically happens in recourse states like: Michigan but thankfully, homeowners have options to handle this process like paying off the balance due as a personal loan over a set period of time.

Another thing that you should be aware of post short sale is that the amount of your loan that is forgiven can be counted against you as income so it’s best to be prepared when tax time comes. To insure that you’re completely prepared for your short sale and are able to smoothly navigate the short sale process it’s best to hire a qualified short sale specialist.

Thankfully there are a wide variety of options besides foreclosure and two of the most popular ones are: Short Sale and Housing Affordable Refinance Program (HARP). What do these two programs have in common? Are they both the same? This article will break down the details so you can make an informed decision.

Short Sale

What is a Short Sale? A Short Sale is for any home owner who owns a home where their mortgage is “underwater”, experienced a prolonged job loss due to the recession, medical illness, death of the primary income earner in the family, extended military duty or job transfer to another state.

Not everyone will qualify for a short sale especially those people who made poor financial decisions like getting into massive credit card debt due to poor financial decisions, divorced their spouse or they just want to walk away from their home because, they hate their neighbors.

A Short Sale is a better option than foreclosure because, it takes less of a toll on the homeowners credit report once their short sale has been accepted and the banks love short sales too because, it helps them to take possession of the home quicker and get it back on the market.

Short Sale Success Tip

The “golden ticket” that anyone must have to get their hardship letter accepted is to write an excellent hardship letter. This letter must state the facts about the homeowner’s situation:

• How did their mortgage get underwater or delinquent?
• What is their life like right now? The homeowner shouldn’t spare the details especially if they are working hard in multiple jobs to pay the bills and provide for their family.
• What will happen if their short sale isn’t granted?
• What did the homeowner do to fix the present situation?

Once the hardship letter is completed it must be submitted to the bank along with financial documents that include five year’s worth of: bank statements, income tax returns, W2’s and statements from other sources of income.

How Long Does Short Sale Take?

A Short Sale can take as little as 60 days from start to finish to as long as six months. Homeowners who want to expedite their short sale must make sure that they submit all of the required documents that their bank needs and then be on call just in case their listing agent contacts them requesting more information.

Before starting the short sale process homeowners should contact their bank to see if their bank will pay them to short sale their home because, certain banks including Chase and Bank of America are now paying home owners up to $35,000 dollars to Short Sale their homes and this money can be used to help the home owner move and settle into a different living situation.

Recovering After a Short Sale

Once the short sale has been completed it’s important for the former homeowner to “dig in” and be prepared to go through a long process of rebuilding their credit. This process can take as long as seven years for their credit to be back to where it was before their short sale but at least they will be able to one day realize the dream of homeownership one again.

Housing Affordable Refinance Program (HARP)

The Housing Affordable Refinance Program or HARP as it’s known by people within the real estate industry is a federal program that was started back in 2009 for homeowners who currently have a mortgage that’s underwater or they owe more than 125% of what their home or property is currently worth.

With the HARP program homeowners can refinance their existing mortgage (underwriting and refinance fees apply), have a mortgage payment that they will be able to afford and continue living in their home.

Do You Qualify For HARP?

To qualify for HARP a homeowner must have a mortgage that is either owned by or it’s guaranteed by Freddie Mac or Fannie Mae. Their mortgage must have been sold to either of these agencies before the date of May 31^st 2009 and the homeowner’s mortgage must have a current loan to value ratio of more than 80%.

Homeowners who have had their mortgage refinanced over the last two years, missed mortgage payments within the last six months or missed one mortgage payment in the last year will not qualify for the HARP program.

Any homeowner who wants to take advantage of the Housing Affordable Refinance Program must also show that they have the income or ability to repay their mortgage over time. This program will help any home owner to get into a more affordable mortgage that offers them better terms.

Millions of Homeowners Will Benefit From HARP

A recent study by Core Login shows that due to the economic crisis there are four million homeowners in the United States that have mortgages with Freddie Mac and Fannie Mae; these homeowners mortgages are underwater and their currently owe more on their homes mortgage than what the home may currently be worth.

As the short sale has become a very popular option among home owners it’s also gained the attention of underwater home owners who can afford to make their mortgage payments but want to short sell for a variety of reasons including: owning more on their mortgage than what their home is currently worth or they are unable to sell their home to cover their mortgage. These home owners have asked the question “can I short sell my house if I can still afford it?” and the answer is yes, this type of short sale is also called a strategic short sale.

Why a Strategic Short Sale Will Work

In 2013 more banks are eager to grant short sales because, they are a more viable option than foreclosure and will enable the bank to get the home back on the market quicker.

Short sales also leave less of an impact on the home owner’s credit report compared to foreclosure which can take 200 or more points off a home owners credit score. When a home owner goes through a short sale they will be able to purchase a new home within two to four years depending on if their loan was with Fannie Mae, Freddie Mac or another lender.

To get approved for the short sale a homeowner must write an effective hardship letter that states in detail their reasons for wanting to short sale like job loss, unemployment, death of primary income earner, underwater mortgage etc.

Sellers should seek the help of a strategic short sale specialist to insure that they are able to write a successful hardship letter that will help the lender to see the seriousness of the seller’s situation.

During the short sale process a home owner should practice sound financial management and avoid spending money on items like electronics or take a vacation because, when any lender sees record of these payments on the homeowner’s bank statements or credit report, they will think that the home owner has enough money to continue making their mortgage payments on time.

Should You Keep Making Those Payments?

By continuing to make their payments it’s very possible that the home owner will qualify for an FHA mortgage loan or a conventional loan to cover any short fall or remaining balance that remains on their mortgage after their short sale has been approved.

If a home owners short sale is approved after they’ve stayed current on their mortgage the bank can still report the short sale to the credit reporting agencies and it will be listed on the home owners credit report as a code #22 but, they will be able to recover quicker financially from their short sale compared to those homeowners whose mortgage payments were delinquent before they went through the short sale process.

Staying current on their mortgage will also help the home owner to protect their credit score because, if their short sale isn’t approved and it will spare them the heartache of losing their home in foreclosure because, they didn’t stay current with their payments.

Should You Stop Making Payments?

Even though short sale is an excellent option that doesn’t require a home owner’s mortgage to be in default, many lenders will respond quicker to a short sale application if the home owner’s mortgage is in default or delinquent.

This option may not be something that a home owner wants to think about since it will have a negative impact on their credit but it’s a viable option to consider since being delinquent on their mortgage could help them to gain the attention of the lender and get them to work with the seller.

Many home owners in the United States are delinquent on their mortgages without a choice in today’s world since they have to use that money elsewhere for things like: buying gasoline for work, food or heat for their home. These home owners should remember to state their reasons for delinquency clearly in their hardship letters because, they will help them get their short sales approved quicker.

Live In A Recourse State?

Many people who have gone through foreclosure and short sales over the last five years received a rude awakening when they found out that their lender was going after them and seeking recourse for the balance due on their mortgages.

To avoid this happening every home owner should make sure that they hire a real estate agent who is experienced in strategic short sales. This step is important because, a qualified short sale specialist will be able to help the seller short sell their home then offer the right advice that will protect the home owner from a potential lawsuit that they might face from their lender over the short fall or balance due on their mortgage.

Before hiring a realtor who has experience with strategic short sales, the home owner should verify the realtors qualifications by asking for references from people they have been able to help with short sales in the last six months to one year because, experience pays off every time.

Get Paid From Your Bank?

If a home owner has a mortgage with Chase or Bank of America they may qualify to receive up to $35,000 dollars from their bank to short sale their home. Thanks to this incentive many home owners are able to walk away from their homes with cash in their pockets and use that money for rebuilding their lives while others are able to use those funds towards making payments to secondary mortgages.

Look For Experience

Short sales have been in existence for over 20 years, since then there have been many training classes which have popped up across the country that promise to train real estate agents, in as little as four hours, how to short sale homes. Sadly, short sale training classes vary by state to state so it’s important to look at the overall level of experience that the agent has achieved, instead of choosing an agent who was just qualified to be a short sale agent.

You should look for an agent who has at least five years of experience with strategic short sales and has closed at least ten or more short sales.

Short Sale Agent Interview

Once you find an agent who meets these criteria, don’t hesitate to sit down with them and ask the agent these questions:

• Are there any “red flags” that can hurt my short sale? Many short sale agents who have been involved with short sales for some time will know what to look for in their clients financial records or hardship case so that client can avoid the frustration of getting their short sale rejected.
• Does my bank have a track record with you? Agents who have experience with banks like Chase or Bank of America are more likely to be an asset to you and help get your short sale approved quicker.
• Who is going to do the negotiations for my short sale? It’s important to find out if your real estate agent is going to handle the negotiations for your short sale when the bank submits an offer that’s too low or your offer is too high. If your short sale agent is going to handle the negotiation, make sure that they will be the one handling it or if they plan on outsourcing the negotiation to a separate negotiator. If they are going to outsource it to a 3^rd party, it may be in your best interest to hire an attorney, 3^rd party negotiator and escrow coordinator to handle the negotiations for you because, each person has specialized experience at handling the short sale and it’s always better to have a team working for you than just one person.
• Will my bank pay me to short sale? In 2013 many banks including Bank of America and Chase are paying their customers up to $30,000 dollars or more to short sale. If your bank has a similar program you should make sure that you qualify to get paid for going through the short sale process.
• How long is it going to take? This is the most important question to ask because; your future depends on it. If you have only one mortgage or loan on your home it could take as little as two months to go through the short sale but, if there are other lenders involved, it could take your short sale up to 120 days to be completed.
• Can you help me write my hardship letter? By far one of the most important parts of the short sale process, the hardship letter is your opportunity to tell your story about why you mortgage is an economic hardship. For example: if you’re working three jobs to pay your mortgage and are still unable to provide for your family, don’t hesitate to write about that. You should also make sure that your letter is legible and easy enough for any child to understand it.

• What paperwork do I need to submit with the short sale application? You will be required to submit two years-worth of paperwork that includes: paycheck stubs, W2 forms, bank statements and proof of income from any sources. Before you submit your financial packet make sure that your short sale agent reviews it to verify that nothing is missing because, lack of the right data can delay your short sale by as much as one month and this can be very frustrating for anyone.

Does The Buyer Qualify?

One major mistake that short sale specialists make is submitting the first offer that comes in without verifying that the buyer is pre-qualified with their bank for a mortgage. Every buyer must have assets available to purchase your home, have approval from their lender and also possess money for the deposit of escrow.

When you’ve found the right buyer you should make sure that they are willing to see the short sale process through from beginning to end because, some buyers are uninformed about the length of short sales and give up too quickly instead of waiting for the short sale to be completed.

Some real estate agents also make the mistake of submitting the first offer that comes in when the offer is below the homes market value. To avoid either of these things from happening you should be involved in the short sale process from start to finish and have your say with the short sale specialist because, if your offer is rejected by your bank, this could set your short sale back by one month or more because, your short sale specialist will have to submit a new offer and this will take time.