Can you do a short sale with a second mortgage?

A second mortgage, just like a first, gives the lender the same power to foreclose as the primary mortgage. The second mortgage holder has to give permission if you want a short sale instead.

Do short sales require lender approval?

Banks generally do not approve a short sale until the bank receives an offer from a buyer. Therefore, the usual way a short sale can be approved is for a buyer to submit an offer. The seller delivers the lender’s required documents to the agent. The buyer submits an offer subject to lender approval.

What are the two conditions of a short sale?

For a sale to be considered a short sale, these two things must be true: The homeowner must be so far behind on payments that they can’t catch up. The housing market must have gone down so much that the house is worth less than the remaining balance on the mortgage.

Can a short sale be denied?

A short sale is sometimes denied due to something as simple as the seller being current on paying their mortgage. The bank’s guidelines might state the bank isn’t allowed to approve a short sale if the mortgage payments aren’t in arrears.

Who is responsible for second mortgage in short sale?

Second mortgage loans take the biggest hit in a short sale. In a short sale, the seller must request approval of the sale from the first mortgage lender, also known as the primary lien holder and the second mortgage lender, known as a junior lien holder.

How is a short sale approved by the lender?

Therefore, the usual way a short sale can be approved is for a buyer to submit an offer. The process will usually play out something like this: The selling agent lists the short sale. The seller delivers the lender’s required documents to the agent. The buyer submits an offer subject to lender approval.

How long does it take to close a short sale?

The short sale process may take more time than a traditional retail sale to complete and it may be difficult to pin down a firm closing date until the seller’s mortgage lender (s) agrees to the short sale. Junior-lien holders such as second mortgages, HELOC lenders and other special assessment liens may also need to approve the short sale.

What happens if you have a second mortgage on a home?

A second mortgage increases the time and hassle of completing a short sale. A large portion of borrowers facing foreclosure in 2012 had more than one mortgage on their home, Bloomberg reports. A short sale involves a property that is worth less than it can fetch on the market.

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