Navigating through financial hardships can be challenging, particularly for homeowners. In certain scenarios, a short sale could emerge as the most feasible alternative.
If you're facing any of the circumstances listed below, you may be eligible for various short sale home alternatives:
- Decline in home market value
- Prolonged financial distress
- Mortgage nearing or in default condition
- Absence of assets
- Failed attempts to sell your home at a price that covers your mortgage
The response of your lender to your short sale request will hinge on the nature of your mortgage. If you hold any of the following mortgage types and are enduring hardship, you may qualify for a short sale.
1. Purchase Money Loan: This type of loan involves pre-determined payments over a specified duration, typically monthly installments including interest and principal. It can encompass one or two loans, and in some jurisdictions, it's non-recourse. Also referred to as a payday loan, it demands high interest rates with the understanding of repayment based on your upcoming paycheck. Purchase money loans are not ideal as standard mortgages since they wouldn't qualify borrowers with a fixed mortgage.
2. Rate-and-Term Refinance: This type of loan is similar to purchase money loans, except that it is a hard money loan and often comes with recourse. This could subject you to a deficiency judgment. In contrast to purchase money loans, rate-and-term refinancing alters the interest rate of an existing mortgage without disbursing new money. It is a superior loan typically issued after the purchase of a home and the completion of the sale. It takes into account credit ratings, which can further decrease overall interest rates if your credit enhances.
3. Cash-out Refinance or Home Equity: These loans substitute an old or existing mortgage with a new one based on a higher sum than previously owed. The difference, generally surpassing your previous mortgage balance, is paid out in cash following bank standards, your home's loan-to-value ratio, and credit profile. Cash-out refinancing can be employed for various reasons, like handling long-standing consumer debt such as student loans, medical debts, or taxes.
Access to these short sale home alternatives can provide substantial respite when grappling with financial responsibilities. However, convincing your lender to consent to a short sale on your own can be tricky due to intricate legal procedures and documentation. As such, securing professional assistance to guide you through each phase can prove immensely beneficial.
