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, including:
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.
Source: “Short Sales: Dispelling the Myths,” Freddie Mac (Jan. 13, 2014)
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