How Mortgage Insurance affects your short sale

Many folks who get a loan without putting 20% down have PMI (Private Mortgage Insurance).  If you are not sure you have PMI, if you make a small payment every month in addition to your regular mortgage payment, this is usually Mortgage Insurance.

Mortgage Insurance is insurance that you pay for, but that does not protect you. Mortgage Insurance protects your lender in case you default on the loan and the lender suffers a loss.

If you attempt to short sell your home, the mortgage insurance company will be paying out on the loss. So what does that mean to you? It means the mortgage insurance company must also approve your short sale. If there is a single party involved in your short sale that will make demands and make it more difficult for you to get approved, it will be your MI company.

MI companies frequently demand cash and/or promissory notes from sellers involved in short sales. These can be negotiated by your short sale professional. However, it is very important to:

• Tell your agent you have MI, so that your agent can properly prepare you in advance
•  Make sure the agent you hire is experienced and equipped to handle this kind of complication
•  Prepare for the fact that there is a possibility of you having to come up with cash or take on a promissory note