The #1 most common question I hear from sellers considering a short sale is whether they should (or have to) make mortgage payments during their short sale. There is generally not a requirement by the lender for a seller to be current or behind to pursue a short sale (a few exceptions apply).
When deciding whether or not to make the payments during a short sale, consider these pros and cons to make an informed decision:
KEEP MAKING THE MORTGAGE PAYMENTS:
- Your credit score will not reflect missed payments.
- The foreclosure process will not begin.
- Many short sales can be approved for current borrowers.
- It will be quicker and easier to purchase another home after your short sale closes.
- Your short sale application will be subject to additional scrutiny by the lender.
- The odds of the lender requiring cash or a note are much higher.
- Funds that would have been available to you will be depleted.
- You may be declined for the short sale.
STOP MAKING THE MORTGAGE PAYMENTS:
- The lender will be facing financial losses and be more motivated, making the short sale approval process quicker and easier.
- You will be less likely to be asked to contribute cash or a note.
- You will have access to funds that would have otherwise been depleted by making the payments.
- Your credit score will be negatively affected by missing payments.
- The foreclosure process will eventually begin and there is no guarantee you will not foreclose.
- If foreclosure begins, you will need to get actively involved in the suit to delay the foreclosure.
Most of my sellers do choose to stop making mortgage payments (if they are not already behind by the time they call me).
Some want to stay current, and many successfully get approved for the short sale anyway. Some also get declined, and choose to try again once they stop making payments. Almost 100% of the time, the second try is successful.