The real estate market is going through a tough time with so many foreclosures and short sales in the market. I have been working as short sale agent in Temecula for a long time and many people ask me about mortgage payments during short sale listing period. “Should we stop making mortgage payments so as to get approval for the short sale?” First of all, only legal attorneys and lawyers are capable of giving such advice as they are licensed professionals and they understanding of mortgage is better than anyone else. But because of the large number of enquiries, I would like to highlight some facts before you decide to stop the monthly mortgage payments.
Prime reasons to stop mortgage payments
In some cases, house sellers are under financial hardships and they cannot afford to make further payments. But I have witnessed cases where sellers deliberately stop making payments due to various reasons. The most common reasons are discussed in this section.
Better chances of approval from Bank: Generally files in default status get priority from banks. Somehow it is not necessary to be in default but some people stop making payments to get better chances of being approved.
Get sufficient funds for relocation: Another common reason is to allocate sufficient money for relocation after the process and that money can be used for renting and safety deposit for the new apartment.
Avoiding obligatory repayment of the loan: In case the borrower is under true hardship and does not have any assets for repayment, then lender is not going to force the repayment procedure. This is a genuine reason for sellers to stop making the payments and nearly 40 percent cases fall under this category.
What are the advantages of making mortgage payments under short sale deal?
I have witnessed lots of cases in my career of working as short sale agent in Temecula that people with regular mortgage payments even after filing a foreclosure receives lots of advantages. It pays to be regular with your mortgage payments and some of these advantages are discussed below.
Protect credit score: If you are regular with your mortgage payments then you can easily maintain good credit score during the period. Although the short sale will be reflected in your FICO score but at least you will save the damage from the late payments.
Save Penalty upon cancellation of short sale listing: In case you do not receive good offers for your house or the lender is not ready to accept the buyer’s offer, then you can cancel the listing without any kind of penalty.
Get qualified for new home: It is mentioned in Fannie Mae guidelines that a borrower can get another new home right after the short sale provided that he has never shown any type of delinquencies. Somehow in my years of experience of working as Temecula short sale agent, I have never met a borrower who received such loan.
What are the drawbacks of default status in a short sale?
Well, a short sale can damage your credit to a great extent and pose other difficulties in front of you. Some of these are discussed below.
Damage to credit score: Keep in mind that your FICO score will be damaged and it will take a lot of quality time to reshape your credit history.
Unable to buy new home: According to Fannie Mae, you have to wait for another two years to purchase a new home and that too with a single 60-day late payment. It is best to avoid late payments deliberately.
The worst thing that can happen to a seller is to lose his house to the bank. Short sales are not a sigh of relief but beginning of new issues for the seller. There are a lot of factors to be considered and I advise you to hire a new council before making any such choice. After all, it is all about your peaceful future.
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