Admin

Short Sale vs Loan Modification

By
Real Estate Agent with Clements Group

Short Sale vs Loan Modification

Do you qualify for a Loan Modification or Principle Reduction?
If yes, you should do it.
 
If you do not qualify for a Loan Modification or Principle Reduction, see questions below.

1) Are you comfortable with your current mortgage payment?
2) Are you confident your income will remain constant?
3) Do you see yourself living in the home for the next 7 to 10 years without having the need to move for     
    employment or to move up or down?

If you answered yes to all of the above, you should stay.

If you don't qualify for a loan mod or principle reduction and if you can't say yes to any of the questions above and you are underwater, a short sale may be a good option.
Now ask yourself this question. How long will you have to wait before you can sell and break even?

Everybody knows when you try to get a home loan in today's market you actually have to prove your income factor in today's unemployment rate. Now you have fewer qualified buyers.
 
Fewer qualified buyers' means home prices will eventually level off. They are going to be lower than they were when sub-prime and Alt-A loans artificially inflated home prices. You will have to rely on a combination of home prices increasing and reduction of principle as you make monthly payments.www.edsellsre.com

Let's look at the numbers.
If you paid $600,000 and had an 80/20 loan 6.275% on the first and 9% on the second your monthly payment including tax and insurance would be $4,710.

You do a short sale and rent a house for 2 to 3 years at $2,500 to $2,800 a month. You would have about $2,000 a month difference so you should be able to save $1,000 every month for a down payment.

If you buy the same house in 2 years for $480,000 at 4.5% with 3.5% down the payment including tax, insurance and mortgage insurance would be $3,185. That's a difference of $1,525 a month. You could do a lot with that money like save for retirement, kids college, take some great vacations, whatever you want.            

 
Short Sale vs Loan Modification, which one works for you? 

Comments(0)