Short Sale Experts

A Guide To The Different Benefits Of A Loan Modification Versus A Short Sale

Short Sale Experts

Are you having problems paying your mortgage bills each month? Perhaps you recently lost your job, and your monthly income has plummeted, or maybe you are receiving treatment for an illness or facing a costly divorce. Regardless of the reasons behind your financial challenges, several solutions can help to manage the problem.

To help deal with the no-longer affordable monthly mortgage payments, it may be beneficial to take specific considerations into account. You have the option of giving up your home and attempting a short sale and receiving cash immediately. However, if you would rather keep the house, it is possible to apply for mortgage loan modifications to lower the monthly payment amounts to a more affordable amount. Each of these options has benefits, but they also have challenges that need to be examined. This article will discuss the different benefits of a loan modification versus a short sale.

1. The Loan Modification

As a means of addressing foreclosure crisis across the United States, the federal government offered a Home Affordable Modification Program, also known as HAMP. According to HAMP, homeowners who are having difficulty meeting their mortgage payments can petition the mortgage lenders for relief in the form of smaller monthly mortgage bills.

Lenders can also reduce the homeowner’s payment amounts in different ways including the reduction of interest rates, reworking the terms of the property loan, and forgiving a portion of the homeowner’s principal balances. Certain lenders may even provide the homeowner with a break from the mortgage payments offering the struggling individual with the opportunity to regain control of finances and mortgage payments.

The primary benefit of the loan modification is that the homeowner will not lose their house and their financial credit rating will not suffer. In fact, it will continue to operate and present the homeowner with a good rating unlike ceasing making mortgage payments.

Unfortunately, there are certain disadvantages to HAMP, and these must also be taken into account before opting for the loan modification. According to the HAMP guidelines, for an individual to qualify, they must have obtained the mortgage loan before or on the 1st of January, 2009. Furthermore, the person must not owe more than $725,000 on their primary residence.

It is also necessary for the person to be employed for HAMP to apply. This is a significant challenge as many homeowners trying to modify loans will have lost their jobs. This means that if you do meet the eligibility requirements, there is no guarantee that the lenders will offer you the loan modification option.

2. Short Sale Realtor – Ruhl Team Short Sale

For individuals who cannot qualify for a mortgage loan qualification, short sales may be the best option. By utilizing a short sale, it is possible for the seller to accept a lower bid for the property in the hope that it will increase the chance of selling the home quickly. In the majority of cases, a lender will take a loss on short sales; however, some lenders agree to this option as a means of avoiding the hassle of foreclosure.

What Is A Short Sale

What is a short sale?

Most people who own a piece of property don’t own it outright. They still have a mortgage, and they pay it on a monthly or bi-weekly basis. This continues until the house is paid off, they sell the house and move to another or until the default on the mortgage.

It is understood that all of us fall on hard times and if you are unable to pay the mortgage on time, you should contact your lender and tell them what is happening. If you fall more than one month behind, you may start getting notices from the bank that you must pay or you run the risk of going into foreclosure. When this occurs, one of the options you have available is a short sale.

You might be asking yourself at this point, what is a short sale? It isn’t a difficult concept to understand. Let’s look into a hypothetical example and see how a short sale might be able to benefit those who are behind on their mortgage. Be sure to find the best short sale realtor in your area.

John and Lisa bought a home when the real estate market was booming. They paid what they thought was a fair price for the house but just a few years later, a recession hit. During that downturn in the economy, the housing market dropped severely, and John lost his job. They were unable to keep up with the mortgage payments, and before long, they were in default on loan.

This couple was facing a very difficult decision. They did not have the option to sell the home and get out from under the mortgage because they now owed more money for the mortgage than what the home was worth. This is a situation that is sometimes called being “upside down” in your mortgage. The option they were able to use was a short sale.

Why would they choose a short sale over a foreclosure? Because it held out the opportunity for them to get out from under the mortgage by selling the home for less than it was worth. Of course, they had to work with the bank to make sure that it was an acceptable option but it did give them the opportunity to get into something more affordable without having a hard hit on their credit scores.

There is some question as to whether selling a piece of property or a home in this manner is good or bad. Some people say that it puts the former homeowner in a worse financial situation because they might have to pay back the difference if they get a deficiency judgment. Then again, the bank may be willing to work with them because they are less likely to trash the house when they leave.

The decision as to whether you should sell a home in this manner is one that deserves careful consideration. As long as you work with the bank and they are willing to work with you, it might be the best option available in tough times.