3. Short-Sale Packages

With so many homeowners owing more on their homes than the home is worth, many sellers are finding themselves in a sticky spot: If they sell their home for less than the mortgage, they have to cover the outstanding balance. To keep from getting hit with this sometimes surprisingly lofty amount, many sellers are arranging a short sale package with their lender.

Under this arrangement, the borrower needs to prove to their lender that they can no longer afford to hold onto the home and/or that someone has offered to buy it at a price that falls short of the initial mortgage amount, says Cummings. The application for a short sale package typically requires financial statements including bank statements, paycheck stubs and unemployment letters that prove your inability to pay the mortgage. In addition, it should include a list of major repairs that the house needs, a letter from the individual who’s offering to buy the house, or the amount that you and your real estate agent project the home will sell for, says Cummings. Should your home sell for $200,000 but you owe $240,000, you’ll be off the hook for the remaining $40,000 and your lender will take a smaller loss than if you had gone into foreclosure.

Click here for more on short sales.

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