When is a short sale the right decision?







4 Short-Sale Myths Dispelled:
Several myths persist about short sales. Tracy Mooney, senior vice president at Freddie Mac, dispels some of the following common myths on the mortgage giant’s blog, i...ncluding:

Myth 1: “A short sale is not an option for me because I’m current on my mortgage payments.”

Freddie Mac Fact: Even if home owners are current on their mortgage payments, they may still qualify for a short sale. They must meet general eligibility requirements, the home must be their primary residence, and their debt-to-income ratio must be more than 55 percent.

Myth 2: “I will be responsible for the entire amount owed on the mortgage.”

Freddie Mac Fact: Home owners won’t necessarily be responsible for the entire amount owed on the mortgage under the Freddie Mac Standard Short Sale program, Mooney notes. Borrowers who complete a short sale in good faith and are in compliance with all laws and Freddie Mac policies will not be pursued by Freddie Mac for the entire amount owed under the mortgage. However, home owners who have the financial means may be asked to make a one-time payment or sign a new promissory note for a portion of the unpaid balance after the short sale closes, Mooney says.

Myth 3: “I can’t get a short sale on an investment property or second home.”

Freddie Mac Fact: Mooney says that investment properties and second homes are eligible for a Freddie Mac short sale. However, borrowers must meet eligibility requirements.

Myth 4: “A short sale will affect my eligibility for a new mortgage.”

Freddie Mac Fact: Home owners who go through a short sale may be eligible for a new mortgage sooner if the short sale was caused from financial difficulties due to income loss, medical emergencies, or other extenuating circumstances beyond their control. Former home owners in those circumstances may be eligible for a new Freddie Mac mortgage once they’ve established acceptable credit for at least 24 months after completing the short sale. Former home owners who underwent a short sale due to “personal financial mismanagement,” however, will need to re-establish acceptable credit for at least 48 months to become eligible for a mortgage backed by Freddie Mac. “You should start speaking to a lender about a new mortgage two years after your short sale closed,” Mooney notes.

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