Get your numbers first
Request a payoff statement from your mortgage servicer. It shows exactly what you would owe on a given date, which is often a little more than your balance.
Then get a value estimate based on recent nearby sales. Subtract selling costs, such as agent fees and transfer taxes, to see what you would really net.
A shortfall example
Hypothetical example. Say your payoff is $310,000 and your home would likely sell for $300,000. If selling costs come to about $18,000, you would net about $282,000. That leaves a shortfall of about $28,000 to cover before the sale can close.
Your options
- Bring cash to closing to cover the shortfall
- Wait, keep paying and let the balance come down
- Rent the home until values or your equity improve
- Ask your lender about a loan modification if the real problem is the payment
- Ask your lender about a short sale if you must sell and can't cover the gap
How a short sale works
In a short sale, your lender agrees to accept less than you owe. You usually need to show a hardship, such as a job loss, and share financial documents.
Short sales take longer than regular sales because the lender must approve the offer. They can affect your credit, though usually less than a foreclosure does.
Will you still owe the difference?
Not necessarily. It depends on your lender's approval letter and the rules where you live. Some lenders waive the rest of the debt, and some keep the right to collect it.
Read the approval carefully before you sign. An attorney can explain what it means for you.
Taxes and buying again later
Forgiven mortgage debt can sometimes count as taxable income, and some exceptions may apply. A tax professional can tell you how it affects your return.
You can buy again after a short sale. Most loan programs set a waiting period, and the length depends on the program. You need a credit score of at least 620 for a CapCenter loan.
