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Kari Shea asked:


That dream home in California has become a nightmare. Interest-only loans provided a way for anyone to own a perfect little palace with all the trimmings, but after a few years the rates soared and the payments became too much to bear. Four of the top ten metropolitan foreclosure areas are located in California. But there is hope. While you’re in the pre-foreclosure stage, a real estate short sale may be the financial savior that you need.

The housing boom of several years ago in California caused many to get in far over their heads. What seemed like a steal for a home in paradise became a bid for a shack in the underworld once adjustable-rate mortgages shot through the roof. If you find yourself in this situation, the short sale may be your best friend.

Many times pre-foreclosure happens because of a sudden and drastic change in your financial situation. Everything’s been downsized, you’re bringing home less money and your payments have skyrocketed. Before you realize what’s happened, you’ve fallen a month or so behind on your mortgage and have been notified of the default on your loan. Your world is shaking, but there’s no earthquake being recorded. Fortunately, this financial hardship will most likely mean that you are eligible for a real estate short sale.

When the amount you owe exceeds the value of your home but you still need to sell, you are talking about a short sale. While still in the pre-foreclosure stage, a deal is arranged with the lenders wherein you would pay less than what is owed on the property. The difference is generally forgiven; though there are pitfalls to avoid.

It’s important to be well aware of any possible legal consequences before committing to a short sale. Be sure that every little detail regarding the release of debt is in writing. Make sure that the lender is not going to force payment of the remainder after the short sale, especially if you have other assets to protect. There have been instances when sellers have been notified that the lender will seek repayment of the debt after the short sale is complete.

Lenders will usually consider a short sale only when you are at least one month in default on your mortgage. It’s also important to have a buyer at hand who is financially able to take on the responsibility. Much documentation is required as proof of your inability to make payments because of your financial hardships. These may include tax returns with W-2s for the last couple of years, bank statements of the last few months and recent pay stubs. A copy of your ‘deed of trust’ and ‘mortgage note’ is also required. All of these documents will combine to form an image of your present financial state.

A home in pre-foreclosure need not be the proverbial financial guillotine that it appears to be. By choosing the option of a short sale you can avoid proceeding into the dangerous zone of foreclosure. Yes, it will affect your credit score. But it’s a far brighter way out of the dark tunnel of mortgage debt than a foreclosure. As always, when considering options such as this, do your homework and find out the best option for you.

Morgan Kennedy asked:


Home foreclosures have become a huge problem as of late. Many people can’t even afford to pay their credit card bill much less a house payment. It has even become harder to get a reasonable home loan due to the economic crunch. This is why some homeowners have turned to the mortgage short sale. The problem with this line of thinking is that it could negatively affect your credit score. Keep in mind this is only an alternative to filing bankruptcy or going into foreclosure.

You may ask what a mortgage short sale is. Well the answer to this is quite simple. A mortgage short sale is the sale of a persons’ property when the owner is financially strapped. The home is sold for much less than the standing mortgage balance. The money gained from this sale is then used to repay the lender or home mortgage company. The lender accepts this partial payment and releases the borrower from their mortgage. This is a more beneficial deal for a lender than a costly foreclosure. The problem is not all lenders will accept a short sale or any type of discounted payoff. The other problem is that not all borrowers or even all properties will qualify for a mortgage short sale.

There are several different options at the borrowers’ disposal and the mortgage short sale is just one of them. If you happen to run into any type of financial difficulties you should ask your lending institution about forbearance on your mortgage. A short sale mortgage is utilized when the borrower has longer lasting financial difficulty. You can also use a deed in lieu of a foreclosure or you could try a short refinance as another option. Something else to keep in mind is that there could be drawbacks if you decide to purchase a mortgage short sale home.