Short Sale FAQ

Short Sales, Mortgage Modifications, and Refinancing: Answers to Your Questions

When facing financial hardship and struggling with mortgage payments, it’s natural to have questions. Many homeowners find themselves unsure of their options and seeking guidance on how to move forward. The good news is that foreclosure is not the only solution—options like short sales, mortgage modifications, and refinancing may help.

Below are answers to some of the most common questions homeowners ask when dealing with financial hardship and mortgage challenges. If you have additional questions or need personalized assistance, contact us today.

Do I Qualify for a Short Sale?

To qualify for a short sale, homeowners must meet one or more of the following conditions:

  • Financial Hardship – A situation that makes it difficult to afford mortgage payments, such as job loss, medical expenses, or divorce.
  • Monthly Income Shortfall – Your monthly expenses exceed your income, making it impossible to continue making mortgage payments.
  • Insolvency – You do not have significant liquid assets that could be used to pay down your mortgage.

Since lenders review each case individually, a short sale may or may not be an option depending on your financial situation.

What is a Mortgage Modification?

A mortgage modification allows your lender to change the terms of your loan to help make payments more manageable. Modifications may include:

  • Lowering your interest rate
  • Reducing your principal balance
  • Converting an adjustable-rate loan to a fixed-rate loan

This option can allow homeowners to remain in their homes even if they can no longer afford their current mortgage payments.

Why Would a Lender Modify My Mortgage?

Lenders are often willing to work with homeowners because foreclosure is costly for them. On average, a foreclosure costs a lender 35–50% of the property’s value. By modifying a mortgage, they may:

  • Avoid the financial loss of foreclosure
  • Keep the homeowner in the property
  • Receive steady payments rather than repossessing a home

What Do I Need to Qualify for a Mortgage Modification?

According to the Making Home Affordable Program, lenders typically require the following:

  • Your current mortgage statement
  • Details about any second mortgage or home equity loan
  • Account balances and minimum monthly payments on credit cards and other debts
  • Your most recent income tax return
  • Documentation of household income, including pay stubs or other sources of income
  • Information about your savings and assets
  • A letter explaining your financial hardship (if applicable)

How Do I Apply for a Mortgage Modification?

The first step is to contact your mortgage lender and ask about modification programs. Be prepared to provide the documentation listed above. If the representative does not understand your request, ask for one of the following departments:

  • Loss Mitigation
  • Mortgage Modification
  • H.O.P.E. (Homeownership Preservation Program)

Before calling your lender, you can check your eligibility online at www.MakingHomeAffordable.gov. You can also find a list of mortgage lenders and servicers at www.HopeNow.com.

What If I Don’t Qualify for a Mortgage Modification?

If you don’t qualify for a mortgage modification, can’t afford your home, and owe more than it’s worth, you still have options.

A short sale is one of the best alternatives to foreclosure. It allows you to:

  • Sell your home for less than what you owe, with lender approval
  • Avoid foreclosure and minimize credit damage
  • Potentially negotiate the remaining debt balance

Certified real estate professionals with the Certified Distressed Property Expert® (CDPE) designation are trained to process and negotiate short sales. If you think a short sale might be right for you, contact us for guidance.

What is a Home Affordable Refinance?

If Fannie Mae or Freddie Mac owns your mortgage, you may qualify for a Home Affordable Refinance (HARP). This program allows eligible homeowners to refinance their loan to:

  • Lower their monthly mortgage payments
  • Secure a better interest rate
  • Improve long-term loan stability

Do I Qualify for a Home Affordable Refinance?

To qualify for a Home Affordable Refinance, you must meet the following conditions:

  • You own and occupy a one- to four-unit home.
  • Your mortgage is owned or backed by Fannie Mae or Freddie Mac.
  • You are current on your mortgage payments (no payments missed in the last 12 months).
  • The amount you owe on your mortgage is close to or slightly less than the home’s current value.
  • You have sufficient income to support the new mortgage payments.