Have you heard the term “underwater” as it relates to your home? This means that you owe more than the home is worth. This is where a short sale becomes a viable option.

A short sale is when a lender agrees to sell your property for less than what you owe on the mortgage. When foreclosure seems to be inevitable a lender will often agree to a short sale so they do not have to go through the expense of foreclosing and then maintaining the home until it can be sold again.

What does a Seller need to know?

All short sales need to be approved by the lender. Lenders will usually grant short sales for two reasons. The Seller is experiencing a hardship and there is not enough equity in the home to payoff the mortgage after paying the costs of a sale. Hardships can include unemployment, a medical emergency, divorce, reduced income, death or bankruptcy.

As a Seller you must provide a financial package to the lender so that they can either approve or reject the short sale. Although the package submitted varies from bank to bank, in general it will include:

•             A preliminary closing statement
•             A completed financial statement
•             A hardship letter from the seller
•             Two years of tax returns
•             Two years of W-2s
•             Two months of bank statements
•             30 days of payroll stubs
•             A letter authorizing your agent to speak directly to the lender
•             A comparative market analysis

Remember that even though you receive approval for the short sale, the lender can change its mind in the middle of the process.

What does a Buyer Need to Know?

You need to know what other properties have sold for in the neighborhood. You will submit an offer based on those comparable sales in order to prove to the lender that you are not too far off from market price. Once the Seller accepts the offer, your real estate agent will forward all required documents to the lender for approval.

The short sale process will be delayed if the package is incomplete so it is important to have an experienced realtor as well as an experienced attorney. They must stay in contact with the lender to keep them accountable and to try and receive short sale approval in a timely manner

The process can take up to 6 months, so it is important to know whether you, as the Buyer, have the patience for this form of sale. Once Seller receives short sale approval letter, the closing often must occur in a few weeks. Buyers should have their loan approved and be ready.

What happens after the closing?

Once the home is sold a lender can get a deficiency judgment following a short sale. In other words you are still liable for the Note. A deficiency judgment is in the amount of the remaining debt on the property that was not forgiven by the bank.

What a Seller must look for in the final short sale approval letter is language stating that the lender waives its right to the deficiency. If the short sale agreement does not contain this waiver, the lender may file a lawsuit to obtain a deficiency judgment.

You need to have the right people on your team in order to navigate through this complex process. It is imperative that you have a knowledgeable Monmouth County real estate attorney on your side.

The post SHORT SALE? WHAT YOU SHOULD KNOW. appeared first on Pilling Law.

1. HIRE A KNOWLEDGEABLE AND EXPERIENCED REAL ESTATE ATTORNEY. This is probably the biggest purchase of your life. Don’t you want to be protected legally should anything go awry?  If you want peace of mind you should consider contacting me.

2.  Explore your mortgage options and down payment options:

There are many of different types of loans. Conventional mortgages conform to standards that are set by government sponsored entities such as Fannie Mae and Freddie Mac. These mortgages require as little as 3% down. FHA loans are through the Federal Housing Authority and allow down payments as low as 3.5%. VA loans are those guaranteed by the Department of Veterans Affairs and sometimes require no down payment.

You can put down a higher down payment which will give you a lower monthly mortgage payment.

There are different lengths for each mortgage. If you want the smallest mortgage payment possible, you can opt for a 30-year fixed mortgage. If you can afford a larger monthly payment, you can get a lower interest rate with a shorter term, such as a 15 or 20 year loan. You can also choose an adjustable rate mortgage which is riskier but offers a low interest rate for the first few year.

You can use a mortgage calculator to determine which mortgage is right for you.

3. Check your credit and try to avoid any new activity:

When you apply for a mortgage loan your credit is one of the main factors determining whether you will be approved. Your credit will help determine your interest rate and possibly the loan terms. You should check your credit before you begin looking for your home. Dispute those charges that you disagree with as those could be dragging your credit down. You may want to try and pay down your outstanding debt as this will help improve your credit. In order to keep your score static after applying for your mortgage, avoid opening any new credit cards or applying for other loans.

4.  Pick the right realtor:

You will be working closely with your realtor so you want to make sure he/she is the right fit. Is he/she knowledgeable about the area, is he/she motivated, does he/she listen to your requests?

5.  Do your research when it comes to the neighborhood and the type of home you want:

Will you like to live in the neighborhood? Check out the schools, drive through the neighborhood, check the crime statistics. Do you want a single family home with a yard? If you want less maintenance maybe a condominium or a townhouse is the way to go. Explore your options

6.  Go to a lot of open houses:

Make sure you see a lot of different homes before making up your mind. Pay attention to what you see and make notes on each house so you can compare them later. Pay attention to the overall condition of the home. Will the home need a lot of repairs, can you afford that?  Do not be afraid to ask a lot of questions about the home such as when it was built, how old the appliances are and how old the air conditioning and heating systems are. If other people are viewing the home and you are unable to ask your questions, schedule another visit so you can ask them privately.

As a first time home buyer you want to make sure you will get to the closing where you will actually get the keys to your new home. I will help you get there!

The post TIPS FOR FIRST TIME HOME BUYERS appeared first on Pilling Law.