Short sales are an alternative to foreclosure.Instead of losing your house in a foreclosure you can turn to a short sale which means selling your house at a discounted rate.Banks agree to short sales in order to avoid the hassles and expenses of going through a foreclosure.

One way to convince your bank to grant you a short sale is to prove to them that it is in their best financial interest.This is something you might not be able to do on your own and you can enlist the services of a Realtor who specializes in short sales.

Your second challenge will be to present to the lender the specific details of your hardship. While a hardship can be subjective, generally recognized hardships include dire changes in employment such as a layoff, a pay cut, a sudden job transfer (whether voluntary or not), divorce, military service, a death in the immediate family, or sudden unintended financial circumstances.
You will need to prepare a Letter of Hardship which must include specific documents that support your hardship. These might well include bank statements, savings accounts, employment records, etc, depending on the source of the hardship.
And by all means, cooperate fully with your bank!

It’s also important to note that you should do your absolute best to keep making your monthly mortgage payments. I know this is much easier said than done, especially when you’re in a financial crisis. But, if at all possible, make sacrifices and be creative.

Let go of a few things that aren’t as important as saving your home from foreclosure. You can also find creative ways to create income, such as renting out a room or two in your home. Even allowing a family member to move in to help with your mortgage can help.

In the meantime, enlist some help with getting your short sale. Either turn to a trustworthy short sales real estate agent, or a HUD-certified housing counselor for assistance.


Thanks for your input.
One should do there best to keep paying their mortgage. Short-selling is just a last resort.

Your hardship letter should be a reasonable one. Don’t just keep on adding unnecessary information but only keep it to the point. You just have to make the bank aware of your situation so that the lender feels pity for you.

I especially like the idea of renting rooms in your home. If fact, I do that currently and plan to do so indefinitely, mortgage or not.

Always write a hardship instead of getting it typed. If you cannot write a proper letter ask your broker to do it for you.

Short sales seem to be all the rage. It is viewed as a “pleasant” alternative to a foreclosure. The problem with this line of thought is that the credit agencies tend to view short sales in the same light as a foreclosure. Some even report them exactly the same.

This means that all short sales are going to create a serious and long-term hit on your credit score. It will also prohibit you from getting a loan for several years to come and when a person does qualify for a loan, the interest rate will probably be higher than average market rates.

Short sales should be viewed as a last resort, second only to foreclosure.

Speaking from direct personal experience, Yes, short sales ultimate shows up pretty much the same as a foreclosure, but sometimes you can get the underwriters to give you an exception if you have exceptional circumstances which I did in my case.

An exception will reduce the amount of time needed to requalify for a mortgage - but does it reduce the hit on the FICO score?

BTW - my research reveals the following loan restrictions after a short sale:

The latest Fannie Mae guidelines state that after a short sale, there is a mandatory waiting period of two years for a loan with an 80% maximum LTV (loan-to-value ratio), or four years for a loan with a 90% LTV.

FHA requires borrowers who weren’t paying their mortgage when they sold their house to wait three years before they can qualify for a home loan. That time penalty may be waived in certain cases, including long-term job loss. There is no FHA time penalty for homeowners who made their house payments in the 12 months before their short sale. The size of a down payment can also shorten the waiting period.

The USDA loan program is a popular option for people who have had a short sale or foreclosure in their past because it is one of the mortgage programs with the shortest waiting periods and most flexible underwriting guidelines. The waiting period for a USDA loan after a short sale can be as little as 2 months in the right situation.