Gainesville Short Sales – What happens in a short sale if I have more than 1 mortgage? During the Gainesville Florida Real Estate boom many new buyers bought a home and paid more than it is currently worth and even possibly closed with an unfavorable mortgage such as an interest only or 80/10, 80/20, or 90/10. Many Gainesville FL homeowners who had already owned their home may have taken out a second mortgage or a HELOC (Home Equity Line of Credit).
Gainesville short sellers typically have loans that are 80/10/10, 80/20 or 90/10. In a standard conventional loan the seller will borrow 80% of the purchase price while putting 20% down (80/20). For those who took out a HELOC, they may have used this money to buy another car, remodel their Gainesville home, pay down debt, send their kids to college or used for another purpose other than the purchase of their Gainesville home. Another addition to the monthly payment and party to the short sale is the PMI or private mortgage insurance. This applies if you did not have the 20% to put down when you purchased your Gainesville home.
In a traditional Gainesville short sale the short sale package is submitted to all lenders referencing the loan with that specific bank. In some instances the first and second mortgage are with the same short sale bank. It is important to process both at the same time; some short sale banks take longer than others. The short sale bank that is in second position and the primary must negotiate to an agreement of how much the second mortgage lien holder is to receive in order for the Gainesville short sale to be successful.
If the homeowner has elected to do a Gainesville short sale and qualifies for HAFA the second will only be allowed to receive up to $6000 towards the amount owed. The primary and secondary are both required to waive the deficiency.
In a traditional Gainesville FL short sale the second mortgage becomes an issue when a large amount is owed such as $50,000 or more. They typically do not want to accept a small amount from the first lien holder (first mortgage short sale bank). Some junior lien holders with an interest in the property may object to the amounts other lien holders are receiving. It is possible for any one lien holder to prevent a Gainesville short sale by refusing to agree to negotiate a reduction in their payoff to release their lien.
There are different ways to work out that amount such as a promissory note, cash to close or maybe even the buyer is willing to partake in helping out.
If the Jr. lien holder is a HELOC the lender can pull credit and see what the money was used for. Maybe you took out $75,000 and used it to buy a new vehicle and some to update your homes landscaping. You will have a car without the car payment and the short sale bank will not see it favorably and in most cases will want a promissory note or cash at closing. In essence you just gave yourself a car payment. If you did not have the money to use to purchase the new vehicle you would have car payment and that is how the short sale bank looks at it.
When you stop making those payments on the HELOC or the second mortgage the bank understands they cannot foreclose because they will not get anything in the Gainesville foreclosure sale. Instead what they are doing is letting go of the real estate security since there truly is not any and they are going to sue on the promissory note.
When you take out a loan you are signing a promissory note that you are going to pay the bank back. Then you are saying sorry Mr. bank I do not have any money or anything to offer you as collateral but my house and that becomes your mortgage instrument. So they do not focus on the mortgage since they are in second position and they in turn focus on the promissory note and sue you for and seek a judgment.
Then the Gainesville underwater homeowner will not have another alternative but to pay or file for bankruptcy, if they even qualify for it. This is why a Gainesville short sale may by your best option.
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Call Stephanie Anson today at 352-260-0153 for a confidential phone interview regarding your options.
Please seek legal advice. This information is for informational purposes only.