Do I have to stop paying my mortgage in order to get a short sale approved?
Posted by Minna Reid on Tuesday, March 27th, 2012 at 11:17am.
The answer to that can be yes, no or maybe so.
While most lenders have not laid out specific rules saying you must be in default to qualify for a short sale, it has been traditionally more difficult to get a short sale approved for a paying client.
However I have noticed more flexibility in this, especially in the last several months. While some investors will still require a default in order to be approved into a short sale, many will not. Keep in mind your lender - Bank of America, Chase, GMAC, Wells Fargo, Nationstar , etc - usually just services your loan. An investor actually owns it and calls the shots. I have seen Fannie Mae and Freddie Mac owned loans be approved lately for current clients. If your loan is insured by the FHA, they will require you be 31 days in default at the time of close. VA does not have a specific requirement for default. Private investors are varied and will all have rules of their own and may be unpredictable.
It is more difficult to get a short sale approved for a paying borrower, however it certainly may be possible. To those who intend to stay current on the mortgage payments my advice is always the same:
- I will be happy to attempt to get it approved that way
- The lender may or may not deny you for not being in default or may force you to default in order to get the sale approved
- The odds of cash contributions/promissory notes as a requirement for short sale approval increase when the borrower is current
Read more about the pros and cons of making the mortgage payments during a short sale
Minna Reid is a CT Licensed Real Estate Broker Associate with CG Real Estate, specializing in short sales, serving the Central CT including, but not limited to; Avon, Berlin, Bristol, Cheshire, Cromwell, Farmington, Glastonbury, Hamden, Meriden, Middlefield, Middletown, Newington, New Britain, North Branford, North Haven, Plainville, Portland, Prospect, Rocky Hill, Southington, Wallingford, West Hartford, Wethersfield and Wolcott.
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Share3 Responses to "Do I have to stop paying my mortgage in order to get a short sale approved?"
[...]my clients had income, assets and had never missed a mortgage payment, I expected a rather tough short sale and perhaps a cash contribution. However, I was optimistic[...]
Posted on Sunday, September 16th, 2012 at 2:57pm.
[...]the beginning. Despite this setback, an approval arrived in less than 8 weeks total. Usually, when homeowners are current on payments and have good income and credit (as this client did) I expect the lender to request a note or a[...]
Posted on Thursday, April 4th, 2013 at 7:58am.
[...]on his two Bank of America mortgages and no way to cover the loss.
Its a common misconception that in order to be approved for a short sale you have to be be behind on mortgage payments. While some lenders do require a default, many have come a long way and do approve current[...]
Posted on Wednesday, July 4th, 2012 at 10:48am.