If you can no longer afford your home in the Atlanta area, or know that you soon won’t be able to afford it, a short sale can offer several benefits over letting the home go into foreclosure. Both you and the bank or lender would rather handle a short sale than a foreclosure — the bank doesn’t want your home, it wants money, and you don’t want to cause significant damage to your credit. However, several misconceptions about short sales often prevent people who would most benefit from them from making one. In this article, we will cover 4 Misconceptions About Short Sales.
Misconception 1: You have to be behind on mortgage payments
One of the most common misconceptions about short sales is that you need to already have fallen behind on your mortgage payments to qualify for one. That’s just not true — a short sale can be an option even when you’re current on your payments. To qualify for a short sale, you usually have to prove that you have a hardship. That hardship can be that your cost of living has gone or will go up, so that it will be difficult to afford your mortgage payments. It can also be that you lost your income or that your income has dropped.
Misconception 2: Short sales are only for primary residences
You can qualify for a short sale whether the home is your primary residence, your second home or an investment property. The eligibility rules are somewhat different for a primary home and for an investment property, though. For example, if your mortgage is owned by Freddie Mac and is for an investment property, you can qualify for a short sale if you are more than 31 days past due on your payments. If you occupy the property, you can do a short sale before falling behind on payments.
Misconception 3: You’ll never get another mortgage
A short sale will negatively affect your credit, but the harm done won’t be nearly as bad as the harm done by a foreclosure. Depending on the reason for your short sale, your credit can bounce back enough that you’re eligible for a new mortgage again after just 24 months. Additionally, making a short sale lets you avoid having a foreclosure on your credit history.
Misconception 4: You‘re on the hook for the rest of the mortgage
While there might be some cases when a lender expects you to pay the difference between the amount the home sells for and the value of the mortgage, according to the Consumer Financial Protection Bureau, in many cases, the lender will waive the deficiency, meaning you aren’t responsible for paying it. Make sure the lender gives you the waiver in writing.
A short sale can help you avoid a negative situation with your home or lender and can be the first step toward getting your financial life back on track when you face a hardship. Don’t let myths about short sales keep you from considering it as an option.
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