Your lender will require many documents to review a short sale. Bank statements, tax returns, pay stubs and many other financial documents will be required. Your lender will review these financial documents to help determine if you qualify for a short sale.
While these documents are important, the lender also wants to know why you are applying for a short sale, they want to see a ligament reason for what caused you to fall behind on your mortgage. Is it a loss of a job, curtailment of income, health problems? They want to know these things as its part of the puzzle that describes your complete situation to your lender.
They also want to know if your hardship is short-term or long-term. Many of my clients have long-term hardships that will prevent them from being able to make their mortgage payments. Once in a while a client may have a short-term hardship such as temporary unemployment. In this case this helps your lender to know if maybe a loan modification rather than a short sale could be the better solution.
When home owners call me asking for help to short sale their home I often first ask them what is their hardship, why can they no longer afford their home? Occasionally a home owner will state that they do not have a hardship. They simply want to move on from a home that is upside down but cannot sell it because they own more than what their house is worth. I then explain to them that their lender is going to require a hardship, and that if they do not have one, and if they are current on their mortgage, it’s highly unlikely that their bank will accept a short sale. This situation is rare and most likely you do have a hardship and just need some assistance in writing one.
Keys to writing an effective Short Sale Hardship letter:
- Be honest and forthcoming-Just be honest with why you cannot afford your home. Maybe it is because of an involuntary job transfer, illness, loss of income, divorce/legal separation, or military transfer. Whatever the reason, make it clear and concise.
- Mention Long-term or Short-Term-If you hardship is long term state that it’s long-term and why.
- Bankruptcy Intentions-If you are being advised by your attorney that you may have to consider filing bankruptcy if the lender does not accept a short sale than please state this.
- Keep it to one page-The loss mitigation reps who review short sales are often understaffed and do not have time to read a 2 to 3 page hardship letter.
- Use a timeline-Include timelines of when your hardship started; what date you lost your job, incurred health problems, etc.
Remember, that the hardship letter is your chance to state why you can no longer afford your home, of which combined with your financial data will help your lender to determine that accepting a short sale is the best options for you and your lender.