Should She Stay Or Should She Go Now?
I was on a popular real estate website yesterday and was shocked to see some of the answers given by my fellow Orange County real estate agents here in Southern California and various other states, to a similar question.
The very distraught Southern California homeowner bought her home at the peak of the market, and has since lost approximately $200,000.00 in value. With her initial down payment, she is about $150,000 upside-down on the mortgage, meaning, she owes approximately $150,000 more than what the home is now worth.
To make matters worse, the house needs work, and the owners do not have the funds to make these urgent repairs. However, the homeowner admits to having enough income to continue making payments, and has a very affordable debt to income ratio. She was asking advice as to what options her family has, and if it would be prudent to “walk away” from the house and home loan.
Did They Just Say That Out Loud?
What was shocking was not the amount of casual suggestions that she walk away and stop paying, as I’m not about to judge anyone and don’t know how their personal experience has shaped their views, but in the amount of comments from so-called “real estate pros” that suggested an Orange County short sale or loan modification!
I guess I just believed that most real estate “professionals” knew that you needed to be able to verify that you have a hardship in order to qualify for an Orange County short sale or loan modification. Actually, the Orange County short sale and loan modification qualification guidelines and required documentation are basically identical. About the only difference between the 2 options is whether you get to stay in your home, or you sell your Orange County CA home, based on whether you can afford a modified payment or not.
How Do You Qualify For A Loan Modification or Short Sale?
So, what is a hardship? A hardship is a loss of income due to any number of reasons beyond your control, or an unforeseen increase in your expenses that make it difficult for you to continue making your mortgage payment, including:
- Loss of job.
- Reduction of hours for wage earners.
- Reduction of work for self employed.
- Death of a contributing family member.
- Disability of a contributing family member.
- Military deployment.
- Medical expenses.
- Increase in mortgage payment due to a reset of your adjustable interest rate.
- Increase in mortgage payment due to a reset of your negative amortization loan (the time at which your full principal and interest payments must be made, including any negative equity that was added to your loan balance while you were making the minimum payments).
- Increase in mortgage payment at the end of your interest only loan period (the time at which your loan changes from an interest only loan to a fully amortized loan and the full principal and interest payments must be made).
Why You Will Be Denied A Loan Modification or Short Sale
What is NOT a hardship? While these circumstances may be upsetting, unfair and certainly not your fault, as a homeowner, they are not “hardships” in the eyes of a lender, and you cannot qualify for a loan modification or Orange County short sale strictly based on these factors:
- You owe more on your house than the current value.
- Your home needs repairs that you cannot afford.
- You only planned to stay in the house for a short period of time, and don’t believe it will go up again in value within that time frame.
- You purchased the property as an investment, and cannot sell the property at this time and make a profit.
Do You Qualify For A Loan Modification Or Short Sale?
If you believe that you may qualify for a loan modification or Orange County short sale, based on the hardships listed above, or any other circumstances that I may have failed to mention, it is always best to speak with a local professional that has experience in these matters.
The best place to start is with referrals from trusted friends and family members. However, it is often a touchy subject, and many homeowners are reluctant to share their private and financial issues with others. If that is the case, then you will need to locate a reputable and experienced professional online, and/or get information from government sources.
I would suggest starting with the US Department of the Treasury website to gather information about loan modification programs and review your options. There are programs for homeowners that are already in default, and also modification programs for those that are still current on their mortgage.
Related Articles:
- Will The $18 Billion California Mortgage Settlement Really Help Homeowners?
- The Truth About Why Your House Hasn’t Sold
- Will The Orange County CA Real Estate Market Ever Rebound?
- The December 2011 Real Estate Market Report For Southern California
About the author, Gina Lemos, and our Orange County, California team of Realtors®
We are members of the Pacific West Association of Realtors®, proudly serving home buyers and home sellers in Orange County, California, and the surrounding areas.
We specialize in homes for sale, and marketing homes to sell in Anaheim Hills, Brea, Corona, Norco, Orange, Orange Park Acres, Placentia, Tustin, Villa Park, and Yorba Linda, California
We hope that you’ll visit our site frequently to search for homes for sale in Orange County, California, and please contact us if we can assist you with any of your Orange County, California real estate needs.
Gina Lemos
Licensed Realtor® and Mortgage Loan Originator
8181 E Kaiser Blvd
Anaheim Hills, CA 92808
P: (714) 721-6024
F: (714) 998-3678
Gina@OCRealEstateAndLoans.com
CA DRE # 01277795 NMLS # 325704
