Often we get asked the question, “Do I qualify for a short sale?” Here are the two primary ingredients that banks consider when they answer this question.
First, do your expenses exceed your income? As long as you can make your monthly payments, there is no reason for a bank to consider you as a canditate for a short sale. However, if you are in a situation where there is absolutely no money left each month to make your mortgage payment, you may want to explore a short sale a bit further and consider whether or not you have a legitimate hardship.
Second, is the fact that your expenses exceed your income the result of a legitimate “hardship” (as defined by the bank)? This question is a bit more difficult than the first and can be viewed differently by different banks. Here are some guidelines that we have seen as to what is viewed as a legitimate hardship by the banks (in general).
For someone to simply have runaway spending and poor money management does NOT qualify as a hardship for the banks. For the value of the home to be less than what you paid for it (and thus a poor investment for you at the present time) also does NOT (in and of itself) qualify as a hardship. If these things do NOT qualify, what does usually qualify as a hardship?
MEDICAL HARDSHIP: One hardship accepted by most banks is financial hardship as the result of extreme medical expenses. This one is easily understood by banks. You qualified for the original loan, however, you had unexpected surgery/illness/injury and the medical expenses have altered your financial position.
LOSS OF JOB/REDUCED INCOME: A second hardship accepted by most banks is loss of employment (and sometimes reduced hours). Again, you initially qualified for the loan by a sudden loss of income has altered your financial position.
JOB TRANSFER: A third hardship generally recognized is a required job transfer or the need to move to a better area for employment. In this senario you must move, but there is no way to sell your home because it is worth less than your mortgage amount. Many banks will recognize this as a hardship and work with you on a short sale.
DIVORCE/DEATH: A fourth hardship that may be recognized by banks is the divorce of marriage partners or the death of one of the spouses. Here the situation is that with both incomes you qualified for the loan, however, now with only one income you can no longer make the payments. Many banks will work with you in this situation to short sale the home. However, note that if the surviving spouse or one of the divorced partners has the assets/income to afford the home, this may not be approved by the bank.
ECONOMIC HARDSHIP: This is the most debatable hardship and will not be recognized by all banks. However, some banks will approve a short sale based on the hardship of economic hardship. For example, maybe taxes and insurance have doubled for you since you purchased the home, but your income has remained fixed. Maybe you have a rental property that is now renting for half of the original rental value. These hardships are viewed by banks on a case by case bases. Some will approve them, and some will not.
If you have any questions about whether you may be a candidate for a short sale please do not hesitate to contact us at firstname.lastname@example.org or call 352-637-2777.