How to Get a Short Mortgage
Short sale properties can be an excellent investment option for real estate hunters looking for a great deal. A short sale occurs when a homeowner is unable to make mortgage payments, but the bank is not yet ready to foreclose on the property. With a short sale, the bank will agree to take less than the remaining amount on the loan to get the property off its books. This means that potential buyers have a chance to get a great price on a desirable property. It also means that the buyer needs to pay close attention to the process and keep important factors in mind when acquiring the mortgage.
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Instructions
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Shop around for lenders to pre-approve you for a loan value. As you contact lenders, mention that you are looking to buy a short sale property. Due to the complexities surrounding short sales, some lenders are unwilling to offer mortgages on these types of properties. Be sure to ask in advance.
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Review short sale properties to see what is available. Not all short sales are listed on real estate agency websites, and many properties that are indeed short sales are not necessarily noted as such. Contact a real estate agent, particularly one who specializes in short sales or who has extensive experience working with short sale properties.
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Select a short sale property that you are interested in purchasing. Visit a property several times before making an offer. In the case of a short sale, review all public records relating to the property. You will need to take the address of the property to the county government office where deeds are filed to look up the records. The public records should provide you with the information that you need about current loan value and what type of offer to make.
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Make an offer on the property. Bear in mind that with a short sale, the original lender(s) has agreed to allow the mortgage holder to sell the property for less than what is left on the value of the loan. This means that the lender already expects to lose money. Avoid making an offer that is too low; 10 to 15 percent less than the listing price is the norm. The lender is unlikely to accept too great of a loss unless you can convince them that the location or condition of the property is less than desireable and they will have a foreclosed property on their books for a long time if they don't accept a greater discount.
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Tips & Warnings
With any short sale property, check closely for the possibility of more than one mortgage. If there is more than one mortgage, there is more than one lender with a stake in the property. Making an offer that covers only one of the loans means that another lender still has partial ownership of the property. Research loans and property titles carefully before making any offer.
Closing on a short sale tends to take longer than closing on a standard mortgage. Expect the process to take as long as six months.
References
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