When preventing foreclosure, saving your credit could be
the most important things to remember.
Your credit may be adversely affected by a foreclosure, a short sale
may be the answer.
today’s real estate market, many homeowners are left with little or no
equity in their property , facing a foreclosure process because they owe
close to if not more than the value of the loan on their home. In these
types of cases, lenders may sometimes accept discounts on mortgages to
allow the sale of the property and avoid potential foreclosures and
They are not doing this out of charity. These lending institutions don’t
like bad loans on their books. They are also not in the business of
selling real estate. More importantly it may cost them considerably more
time and money to sell these properties at the conclusion of the
foreclosure process. The premise behind a short sale is that the
borrower is also in severe financial stress.
For example, consider that a homeowner with a $200,000 mortgage is late
on his or her loan payments and is facing foreclosure. With the consent
of the homeowner, an offer is made to the lender for $150,000 as full
payment for the loan, which is accepted. The home is than sold to the
buyer and the mortgage debt is forgiven.
Most lenders will request a hardship letter that details the reasons a
homeowner has not made the defaulted mortgage payments. This is usually
an extensive request, which may require the homeowner to submit pay
stubs, tax records and other personal financial records, along with the
letter. It is essential that you submit everything that is requested.
HUD-1 settlement statement
A lender will also require a written contract between the homeowner and
the buyer. A preliminary HUD-1 settlement statement will reassure the
lender that the homeowner isn’t receiving any proceeds from the short
sale. The HUD-1 form will disclose all charges imposed upon the
homeowner and buyer for the real estate transaction.
It usually takes several weeks to receive an answer from the lender once
you have submitted the HUD-1 settlement statement and all of the other
Keep in mind that the foreclosure process is moving along during this
short sale request, so it’s not a bad idea to ask the lender to extend
it until he or she has had time to consider your offer.