A short sale occurs if a homeowner sells a home for less than what is owed. This type of sale is not able to transpire without the approval of the loan provider who has your mortgage loan. Even though the lender normally incurs a loss by allowing a short sale to happen, it is generally less expensive versus a foreclosure.A number of loan companies want this to be the very last option before advancing to the foreclosure process. Hence, the criteria designed to find out which individuals and properties are eligible is rather thorough. Most individuals will need to demonstrate that they really are going through financial hardship and that they can’t fulfill the financial obligations regarding their mortgage contract.A mortgage company will normally require that owners provide a letter of hardship outlining their financial issues and the reasons pertaining to their lack of ability to provide the monthly mortgage payments. As well as the hardship letter, the creditor will probably require that individuals submit a total short sale package explaining their personal financial conditions, as well as submitting bank statements in addition to current pay stubs.If the home owner submits a thorough and convincing package, the creditor will delegate the case to an asset coordinator who will review the details regarding the package and find out it can be permitted.These are genuine reasons that will convince a lender of a financial hardship: – Divorce – Medical emergency – Financial Bankruptcy – Death having to do with a partner or spouse – UnemploymentThe package must contain an adequate explanation pertaining to financial hardship. According to the specific loan servicer, the particular documentation may be required to be able to qualify for a short sale.- Most Recent Pay Stubs – Copies of Previous Bank Statements- Statements of Credit Accounts – Credit Report showing your personal liabilities – Tax Returns for your small business when you are running their own business – List of Personal Assets and Liabilities including a household budgetThe loan provider will also have to evaluate whether the home values in the neighborhood have decreased to a degree less than the mortgage balance. Mortgage lenders will assess recent property sales in the area by checking The local MLS listings along with speaking to Real estate professionals nearby. In order to be entitled for this type of sale, borrowers must typically be more than 3 months behind on their mortgage payments. The default on home loan payments will give the loan provider a strong sense of whether or not the probability of foreclosure is evident, and whether a short sale could help avoid a foreclosure process for both the mortgage lender as well as the borrower. The process can be very cumbersome for distressed home owners. After sending in a short sale package to the loan servicer and being given an approval, borrowers must still find somebody that is able to purchase their house. Because of the complexities that are there throughout a short sale transaction, it is preferable to get the help of a talented real estate agent.