Considering a short sale? A short sale is when you sell your home (condo, house) for less than you owe on your mortgage loan.
You can’t just sell your home to someone and leave your lender on the hook for the loan – for one thing, the lender would show up at the closing and demand payment.
You have to get the approval for the transaction. Your lender, of course, isn’t going to be very happy. Things get even more difficult if you have not one but two loans out on your home, or have Private Mortgage Insurance (PMI) on the property.
The whole process can cause headache after headache for owner, buyer, and lenders, for some obvious and some not so obvious reasons.
Bernice Ross of Inman News wrote about it, today.
One of the biggest issues in closing short sales is secondary financing. If the holder of the first mortgage is going to have to take a loss, it usually is reluctant to give any type of payoff to another lender who is in second position.
The holder (or holders) of the secondary financing can refuse to cooperate unless it receives part of the sale proceeds.
And, if you have PMI?
Complicating issues even further, many borrowers who placed less than 20 percent down on their property.
Assume that a borrower is putting 10 percent down and obtaining a 90 percent loan. The lenders normally would require a 20 percent downpayment and would give an 80 percent new loan. PMI insures the 10 percent “difference” between the borrower’s down payment and what would have been an 80 percent loan amount.
What seems to be a common source of frustration for both agents and consumers is that the PMI companies have joined the lender in asking homeowners to sign a promissory note for the shortfall amount.
An excellent article on how the process works and how you can make it work for you.
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