JP Morgan Chase and Bank of America have recently both pledged more money to expand their programs to help homeowners that are behind on their mortgage payments. (Nov 2008) Both banks are looking to help approximately 400,000 homeowners by modifying their loans. Some of the options include reducing the interest rate or changing the terms of the loan.
Obviously this is a win/win situation – the homeowners get to stay in their homes and the banks don’t have to go through the expense of foreclosure.
What does this mean to you if you’re currently looking to buy a home? First, let me give you a definition and then we’ll talk more below.
Definition of a Short Sale: A situation where the seller owes more on their mortgage than their house is currently worth. The only way to avoid foreclosure is to sell the house with the bank’s agreement that they’ll accept less than the amount that they are owed on the mortgage.
Right now most banks are taking 3 weeks and up to 3 months to make a decision on accepting a short sale. If you currently have an offer in on a short sale property, or are looking at homes that are short sales, know that the additional funds pledged to help struggling homeowners might mean that the owner of the home you’re trying to buy can find a way out of their situation. We’ve already seen a few properties taken off the market because the homeowners have now been able to modify their loan so it’s more manageable. So, if you are a buyer looking at short sale properties, be prepared that there’s a chance that the seller might be able to come to terms with their bank and be able to keep their house. There are plenty of other houses out there from owners that do want to sell.
If you’re a seller having trouble with your mortgage payments – contact your bank right away. Even if you’ve talked to them in the past and didn’t get any results, these additional funds just might help you out of your situation.