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Frequently Asked Questions About California Short Sales in Lancaster and Palmdale:
What Is A Short Sale? – Short Sales are one alternative to a foreclosure. When the homeowner (borrower) can no longer make their mortgage payments, they are faced with many decisions. One is to allow the lender to foreclose and take the home away, another option is to get their lender(s) to agree to accept a payoff amount that is less than the balance owing on the loan(s). That is why they are called Short Sales, because they pay off amount is Short of the owed amount.
Will I Have To Pay Taxes? – There may be tax consequences for completing a Short Sale, but the decision is made on a case by case basis. When you borrow money from a lender, and the lender later Cancels or Forgives the debt, the lender may issue a 1099-C to you and the IRS. However, due to The Mortgage Debt Relief Act of 2007, you may not be required to pay taxes on the income (cancelled or forgiven debt) on the 1099-C.
How Will This Affect My Credit?– This is probably the most common question with regards to Short Sales. The degree to which your credit will be affected depends on numerous variables. The single largest variable is if you miss a payment, and if so how many you miss before completing the Short Sale. This is because once you are at least 30 days late on your payment, the mortgage company(ies) can report to all of the credit bureaus that you are behind on your payment(s). They can, and likely will, proceed to continue filing with the credit bureaus for every payment you miss, as well as report that you are now 60, 90, 120+ days late on previous payments. After completing a Short Sale, the mortgage company(ies) usually report that your account has been “paid in full, for less than the full amount” or “settled.” Neither a Short Sale or Foreclosure are favorable to your credit or credit score, however the impact of a Foreclosure is much worse.
When Will I Be Able To Buy Again?– There are also many variables to be considered in answering this question, but it is not uncommon for someone to complete a Short Sale and rebuild their credit enough to purchase a home within a two year period. Major factors that affect the timeline of you being able to purchase again have to do with your other open lines of credit. Like, how many do you have, what are their balances, are they (have they remained) in good standing, and for how long. While you will have a blemish from the Short Sale, as long as you have maintained other accounts properly you will continue to build your credit starting the day after the Short Sale appears on your credit. It is important to keep open lines of credit throughout the process, as they may prove difficult to obtain afterwards. Credit and Credit Score Experts use the rule of thumb that you can purchase as early as two years after a Short Sale, five years after a Foreclosure, and seven years after a bankruptcy.
Will The Bank Give Me Money To Move?– Not all banks offer relocation assistance (cash for keys) programs. For the ones that do, there are several key factors that are used for the mortgage company to make their decision. One, do you live in the property? Is this (or has this been) your primary residence for two of the last five years? Does your current financial position meet their requirements for relocation assistance? Another factor is the type of loan that you have. VA loans have a similar, but different process for the short sale and relocation assistance programs.
Is It Worth All Of The Headache? – This really depends on your situation, and what your plans for the future are. Completing a Short Sale is by no mean easy, and for some the benefits of lessening the impact on their credit or determining how soon (if ever) they can purchase a home again are simply not worth the hassle. This topic is one of the reasons why we offer free consultations to the public, so that we can help walk them through decisions they will make after their home is no longer theirs, and how they will be affected by a Short Sale, Foreclosure, or Bankruptcy in the time to come.
The Short Sale Process in California:
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