Loan Modification or Short Sale
Should I do a Loan Modification or Short Sale?
Loan Modification
The goal of a loan modification is to reduce a homeowner's mortgage payment and
make that payment affordable. This can be done by:
- Lowering your interest rate to lower your mortgage payment
- Extending the term of your loan
- Adding unpaid interest to the principal balance
- Reducing the principal balance, although this happens less than 10% of the time.
Temporary Loan Modifications
Some banks are offering temporary loan modifications. This means that the bank will
offer to modify your loan on a temporary basis, typically 3-6 months, and at the
end of that time period may make your modification permanent. Be aware that at that
end of that term, the bank is free to cancel your modification and go back to your
original loan terms.
Can I do a loan modification and short sale at the same time?
No, most banks will not open a file for your case in the loan modification department
and the short sale department at the same time.
Do I Qualify for a Loan Modification?
Before you decide to attempt a loan modification, you need to find out if you would even qualify under the government's plan. We have provided a simple form that you can fill out and get the results instantly.
Check to see if you qualify for a loan modification.
Why you might Short Sale your House
If you would prefer to get out from underwater on your house, you may want to choose
a short sale instead of a loan modification. In a short sale, the bank will allow
you to sell the house for less than you owe. If your home is worth less than you
currently owe, it might make more sense to do a short sale and instead of continuing
to make payments on a losing asset.
Here are something to consider about a short sale
- According to Fannie Mae guidelines, you may be able to buy another house after 2
years.
- Both a loan modification and a short sale may negatively affect your credit, but
both solutions are better than a foreclosure.
- A short sale can relieve you of the burden of a house worth much less than you owe.
If you are still trying to decide between a short sale or a loan modification, we have provided a simple form to help you analyze your situation.
Which is better for me? A short sale or a loan modification?
