One of the most common ways to avoid foreclosure when facing a financial hardship is to short sale your property. A short sale, by definition, is selling your home for less than what is owed, and as of April 5, 2010, you can even get a little cash from the government to do so.
The HAFA (Home Affordable Foreclosure Alternatives) program introduced by President Obama, allows homeowners up to $3,000 to avoid foreclosure after closing on their short sale. Here are some facts that you need to know about HAFA:
Home Affordable Foreclosure Alternatives Facts
The first step to qualifying for HAFA is to apply for HAMP, (Home Affordable Modification Program). You see, in order to get the $3,000, you must try a loan modification first. Here are the rules of eligibility for the HAMP program:
- Must Be A Personal Residence
- Mortgage Amount Must Be Less Than $729,750
- Must Suffer A Financial Hardship
- Mortgage Must Have Been Initiated Before January 1, 2009
- PITI And HOA Must Be More Than 31% Of Borrowers Gross Monthly Income
The second step is to get denied by HAMP. If any of those five rules do not apply to you, you are not eligible for HAMP. Not qualifying is a good thing if you wish to short sale your home through the HAFA program.
If you do meet these eligibility rules it’s up to your bank to decide if they will allow you to modify your loan, and everyone knows how difficult that can be. Less than 30% of homeowners who apply for a loan mod are approved, so there’s a pretty good possibility you will be denied.
Once you’re rejected from the HAMP program, you can do a HAFA short sale or pursue a deed in-lieu-of foreclosure. In order to qualify for the HAFA short sale program, there are a few more eligibility rules. First off, HAFA will pre-approve the short sale price and you only get four months to sell with a real estate agent.
Just like the HAMP program, the home has to be your principal residence. The mortgage must be less than $729,750. You must be 60 days behind on the mortgage. The mortgage has to be originated before January 1, 2009, and sellers with government loans do not qualify.
After jumping through all these hoops, the benefits of the HAFA program are worth it. If you sell your home within the four month time period, you will receive the $3,000 check for relocation expenses from the government. But that’s not all.
Your lender can not pursue a deficiency judgment. You wont have to make a seller contribution and the bank cannot foreclose during those four months. As you can see, short sales are a complicated process and require the expertise of a qualified short sale agent. If you’re in the San Diego area, please contact us for help with your short sale process.
Keith Munsell 
