A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes the title of your home through a lengthy legal process and then sells it.
Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, contact your lender to see if they have any programs to help you stay in your home. If your situation is temporary, your lender may agree to a modification such as:
- Refinancing your loan at a lower interest rate.
- Providing a different payment plan to help you get caught up.
- Providing a forbearance period if your situation is temporary.