Short Sale Qualifications

 Must HaveQualifications for a Short Sale

1. Financial Hardship
2. Monthly Shortfall
3. Insolvency

While the misconceptions of what qualifies a seller for a short sale are many, the reality is actually very simple. Following is an explanation of the three major items that banks will be looking for to consider a seller for a short sale. While there will be much more information required, this is an excellent place to start. A seller who does not meet all three of these
thresholds will not qualify. 

1. Financial Hardship
First and foremost a lender will want to see that you are experiencing a ‘financial hardship’. A financial hardship is a verifiable issue that has caused your to miss payments or have financial difficulties. Financial hardships can be issues such as:
* Mortgage Payment Adjustment
* Job Loss
* Too Much Debt
* Business Failure
A simple definition for ‘financial hardship’ is:
A material change in-between the day the mortgage was signed and today that has affected the borrower’s ability to pay.

2. Monthly Shortfall
Almost every lender will want to see that a potential short sale client cannot afford to pay their mortgage. The way that this is demonstrated is on a financial worksheet that is essentially a monthly profit and loss statement. While this may sound difficult in reality determining whether you have a monthly shortfall or not is actually relatively easy.
The equation is:
Total Monthly Income - Total Monthly Expense = Monthly Shortfall

If you do not have a monthly short fall but will have one soon due to a payment increase or pending layoff, etc. then you still can qualify for a short sale as long as this issue is verifiable.

3.Insolvency
In order to qualify for a short sale, you cannot have the means to pay down his mortgage. This means that the mortgage company wants to see that you owe more than you have in cash (know as being insolvent). You do not however have to be completely broke-this is a common misconception, the lender will want to see that over time the borrower will not be able to pay their obligation.