What is An Upside Down Mortgage?

An ” Upside Down Mortgage ” is when you have negative equity, you’re “Underwater”–owing more than a home is worth, you owe more than market value.

Where do I Start?

The short sale process begins with the client having to show that they are eligible for a short sale. All lenders typically require two years of tax returns, two years of W2’s, most recent month of bank statements for all accounts and a hard ship letter. The process of getting approved for a short sale is the exact opposite of what a borrower goes through when they are trying to obtain financing. When a borrower obtains financing they have to show that they can afford to make the mortgage payments. When a seller is trying to get the bank to approve them for a short sale, they have to show the bank that they have made every attempt possible to try and make the payments. If a lender sees that they have other liquid assets they will not be very likely to help a seller out and approve them for a short sale.

Do’s & Don’ts of a Short Sale

What you need to do if you can’t make your mortgage payments is take action.  You may have time to do a short sale an not have a foreclosure show up on your credit. The key is taking action, speaking to your bank or finding a experienced real estate agent that knows how to do a short sale. You do not want to waste time because your home may go into foreclosure.

As a real estate broker, I am not licensed as a lawyer nor a CPA and cannot advise on some of the things you may run into. Except for certain conditions pursuant to the mortgage forgiveness Debt Relief Act of 2007, be aware the I.R.S. could consider debt  forgiveness as income, and there is no  guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.