Lenders, government can offer help with a short sale

Q: I can’t afford the payments on my house and want to sell it, but it’s going to have to be a short sale. Are there any programs that I should know about?
A: I’m sorry you are in this situation. It must be a painful decision to have to sell your home because you are struggling financially, but you are asking the right questions.

As most people know by now, a short sale happens when the lender accepts a price lower than the amount owed on the mortgage.
Your first step is to talk to a realtor familiar with short sales and find out what programs he or she knows about. Also, talk to your lender.
Each bank handles short sales differently. Some banks have their own short sale program. Others use government-sponsored programs, such as the Home Affordable Foreclosure Alternatives (HAFA) program.
A HAFA short sale can help you mitigate the damage a short sale does to your finances and credit. For example, if you are approved for a HAFA short sale, you won’t have to pay back the shortfall on what you owe and what the bank will net on the sale of the house.
This is less damaging to your credit and, obviously, to your finances. You might even receive funds to help you relocate. It’s a good program, but there are many requirements.
You can learn more about the program by visiting the Making Home Affordable website, www.Makinghomeaffordable.gov.
You should also talk to a Housing and Urban Development (HUD)-approved counselor. Here are some questions to ask as you research the process.
Do I have to have missed payments to be eligible for a short sale?
Do I have to still live in the house? If not, how long ago can I have moved?
Do I need an offer to apply for a short sale, or can I apply right away?
What documentation do I need?
Do I need to repay the short fall?
What impact will a short sale have on my credit?
Make sure you understand the process before you apply to do a short sale. One missed step or piece of paper could make you ineligible for whatever program you are able to qualify for, either through the government or your lender.
Linda Goodspeed is a longtime real estate writer. Email her at: lrgoodspeed@comcast.net.

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