If you're behind on your mortgage payments, rest assured you're not alone. Right now, millions of Americans face the same challenge and are seeking the best solution. And contrary to what you may believe or have heard, foreclosure isn't the only answer--even if you've already received a foreclosure warning letter from your mortgage lender's attorney.
Every state has a different set of rules that govern the timetable for foreclosures, but you may still have time to work out a solution. One of them is called a short sale, and it just may be the relief you seek. If you've heard of short sales before--but also heard how difficult they can be, don't let that deter you. Short sales aren't what they used to be. Gone is the long and complex process that failed as often as not. Today, mortgage lenders--along with the federal government--have streamlined the short sale process to make it them more efficient.
So, what is a short sale?
It's a process in which the mortgage lender allows your property to be sold for less than the remaining principal balance on the loan. Short sales can be the answer for homeowners who can no longer afford their mortgage payments. And if you participate, you may be eligible for a lump sum payment for relocation assistance. Most lenders offer short sale incentives, so you should check with your specific lender to find out what programs they offer. The amount of the lump-sum payout varies by program, individual circumstances and loan characteristics. The incentive is typically paid when the short sale is completed.
5 Critical Factors to Consider
As you begin evaluating if a short sale is right for you, answer these five questions and you'll be well on your way to knowing if a short sale is a good choice for you.
1. Have you talked to all your mortgage lien(s) holders? All of the lien holders on your property must approve the short sale. If you have a second lien holder, you will need to not only get approval from your first mortgage lien holder but also the second lien holder.
2. Do your lien holder(s), real estate agent and new buyer agree on the property's value? What contingencies are in place if they don't?
3. What documentation will be required? The transaction will require a number of documents such as a Letter of Authorization, Listing Agreement, Purchase Contract, Estimated/Final HUD 1 Settlement Statement and Subordinate Lien Approval Letter(s). In addition, you will also be asked to provide a payoff for any subordinate lien(s), hardship documentation and financial information such as pay stubs, tax returns and bank statements.
4. How long will it take? Generally you can expect the approval to closing process to take around 30 - 45 days. However, the process can take longer. For example, the process can be slowed by extensive negotiations between parties or obtaining subordinate lien holder approval(s).
5. Will a short sale affect my credit? Yes, a short sale can impact your credit. For example, your mortgage lender will report the short sale as to credit reporting agencies as "paid in full for less than full balance" or something similar. For more information about credit scores visit the Federal Trade Commission Consumer Protection website (ftc.gov). Additionally, there could be tax consequences; ask your tax advisor to be sure.
Like to learn more?
The last thing your mortgage lender wants to do is foreclose on your home. That doesn't benefit anyone, but the further behind you get on your payments, the fewer options you'll have to work it out. The best thing to do if you're behind is to act immediately.
In addition to a short sale, you may have other options as well, such as a deed-in-lieu of foreclosure, partial claim, mortgage modification plans, repayment plans and deferment plans. The Citi Mortgage Homeowner Assistance Team will walk you through your options and help you decide which one will work for you best.
If you're a Citi Mortgage customer, call the Citi Mortgage Homeowner Assistance Team at 1-866-272-4749. The hours are Monday - Friday, 7 am to 11 pm; Saturday and Sunday from 7 am to 7 pm. All times are Central.