Calculate the Real Amount You Owe On A Short Sale

The definition of a short sale – selling your home for less than you owe on it. Simple, isn’t it? Well, slow down, Einstein. For San Diego short sales or Phoenix or Tulsa, Oklahoma — you first have to figure out one important fact: what do you really owe on the property?

The most popular answer for this question when I ask people is: “my mortgage balance.”

But that is not all of it and that’s why I wrote this blog.

First, you do have your primary or first mortgage, mortgage principle balance and any past mortgage payments that you have missed. You will also have interest due, and the penalties that your bank is charging if you are behind on your mortgage payments.

Ok, so this covers your first mortgage debt, but there is so much more.

Do you have a second mortgage on the home? A second mortgage can trip you up before you know what’s hit you. That’s because the second mortgage holder must agree to the short sale, and they have historically gotten the short end of the stick when it comes to short sales, foreclosures and bankruptcies. But that’s another topic, so for now, you can count on having to pay your second mortgage company something to let you short sale your home.

At this point you may be thinking, “that’s it isn’t it?” Well, no it’s not, let’s keep looking.

• Do you belong to a homeowner’s association? Are you behind on the dues, or will you be behind by the time the short sale goes through? The HOA fees that are unpaid are considered part of the debt as well.

• What about your property taxes? If you are behind then add that amount as well.

• Um, do you owe the IRS any back taxes? These could be on your home too.

• Do you have mortgage insurance on your home? If so, you may have to pay a little somethin’ somethin’ to your lender’s mortgage insurance provider to let you out of the loan.

Ok, that is all that I can think of off the top of my head for who you have to payoff while doing a short sale.

Oh, wait – don’t forget the costs associated with the sale. Some lenders will require you to pay the sales costs and other won’t. This includes who is paying the real estate agent representing you in the short sale transaction. For any of these costs you may be able to negotiate with the buyer to pick up some or all of the tab, but you will have to be prepared to pay them if they won’t.

Now, I think we’re to the bottom of my list of folks who may have their hand extended for payment in your short sale transaction. For sure it ain’t just what you owe your first mortgage company.

Loan Modification 101 – Part 6 of 6

Hope you’ve been enjoyed the series on loan modifications. This is final (sixth) in a six part series on loan modifications written by Morgan Brown at Blown Mortgage. Please be aware that I can not help you with loan modifications. You should contact your loan servicer or a local mortgage company which specializes in loan modifications if you are seeking assistance. The Arizona Mortgage Team blog has information for those who are in the Phoenix, AZ market.

Part 6 of 6

Finalizing your loan modification

Congratulations! Your loan modification is almost done. Here are just a few tips to wrap up the process.

You’ll receive a loan modification packet from your bank that looks very similar to loan documents. Review them to ensure the following terms are what you agreed to:

  • Interest rate
  • Interest rate reset cap
  • Term of modification (how many years)
  • Monthly payment
  • Good faith payment due
  • New principal balance of your loan

If all of these are in good shape you’ll need to:

  • Sign the documents in the presence of a notary
  • File a copy for yourself
  • Wire good faith payment funds to the bank via the wiring instructions they provide (they will not accept a personal check)

Once that’s all done your loan modification is complete. Congratulations! You made it.

Stay tuned to this blog for more great real estate, mortgage and loan modification advice. Thanks for reading and please share this series with friends and family who may need this help.

Loan Modification 101 – Part 5 of 6

We’re almost there. Wow. This is a long series isn’t it? This is a fifth in a six part series on loan modifications written by Morgan Brown at Blown Mortgage. Please be aware that I can not help you with loan modifications. You should contact your loan servicer or a local mortgage company which specializes in loan modifications if you are seeking assistance. The Arizona Mortgage Team blog has information for those who are in the Phoenixa, AZ market.

Part 5 of 6

Negotiating new loan terms as part of your loan modification

If you’ve gotten this far, congratulations! It means you’ve been approved as a loan modification candidate and the bank has or will be making you an offer very soon. This post will cover some ways to negotiate with your lender to get the best possible modified terms for your new mortgage.

What to expect from your bank offer

If the bank does approve you for a home loan modification there are a few constants that you must be aware of:

  • The bank will not write down the principal balance of your loan, they will adjust your interest rate to lower your payments, but you’ll still owe the same amount on your mortgage.
  • The bank will not waive late payments. These will usually be added to your principal and tacked on the back of the loan.
  • The bank will require a good faith payment ranging from one to two month’s mortgage payment as a sign of good faith that you’re committed to the mortgage.
  • The bank will demand that you have the ability to afford a reasonable market interest rate as part of your modification. (You won’t be negotiating for 1% when the going rate for a 30-year fixed is 6.25%.)

What you can negotiate

  • Interest rate. Your interest rate will typically be reduced between 2% and 4%. If you’re interest rate is currently 9% after an ARM adjustment, you can negotiate for a 6% 30-year loan fixed for 5-years no problem. You will have problems negotiating for a 3%. It’s not going to happen.
  • Post-modification adjustment cap. After a fixed period (typically 5 years) your modification will expire and your rate will become adjustable again. You can negotiate the cap of your adjustment. Say if you agree to a 6% loan you can negotiate a cap at 8% or something similar to protect you from a similar reset disaster in the future.
  • Good faith payment. Every bank will require a good faith payment of some sort to get caught up with delinquent payments before they go through with a loan modification. This is typically one to two months of mortgage payments. If you’re in a bind this may not be feasible. You can often negotiate this down to half a mortgage payment. Either way you’ll need to make some sort of payment – be prepared for that.

Take yourself out of the equation emotionally

Your home is an emotional asset. Your family lives there, it holds your memories, etc. Do not let you emotions get in the way of negotiating. Use these tips to be a better negotiator with the bank:

  • Have a game plan. Have a hoped-for mortgage payment and interest rate so that you know what you’re negotiating for. Stick to your guns and be firm on the terms so you can get the best deal possible.
  • Keep a calm demeanor and realize you’re working with another human who can either help you or make your life hell. Work to make them want to help you more.
  • Be polite, yet assertive. If you don’t agree with something speak up and voice your objection. Be polite, but know what you want and stick to your guns.
  • Appeal to people’s sense of fairness. Use terms like “doesn’t that seem fair?” or “isn’t that reasonable?” People have a hard time objecting to something that seems fair or reasonable.
  • Get something if you’re asked to give something. Quid pro quo is fine here. If you’re asked to give something up (like a slightly higher monthly payment) then ask for something in return – a lower good faith payment, for example.
  • Document everything. Don’t get stuck in a game of he said, she said. Write down offers so that you have a record of what’s on the table at any given time.
  • Elevate to a decision-maker. Feel free to ask to speak to a manager or supervisor if you’re dissatisfied with your progress.

Negotiate to a point where you’re in the target range of your hoped for mortgage payment and interest rate and good faith payment. Once you’re there take the offer. No need to get greedy when your home is on the line. Next we’ll talk about wrapping up your loan modification.

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.