A loan modification might be a good option for homeowners struggling to pay their mortgage each month but still want to keep the home. Loan modifications typically start out at a fixed rate of interest for the first five years and then convert to an adjustable rate mortgage or the homeowner can refinance. This is really just a temporary fix so that homeowners can get back on their financial feet. If you’ve already started the loan modification process, the first adjustment might be easy to take but then the subsequent adjustments in the monthly payments over time can make the homeowner wish they had chosen a short sale instead.

If you started the process with a loan modification or you’d like to switch to a short sale at this point, lenders are reluctant to offer other options. We always say to contact your lender and communicate but many lenders are simply refusing to offer any other options. Either the person answering the phone doesn’t know or simply doesn’t care; they simply want you to make the modified payments.

This is where you need to speak with a short sale agent. These agents handle numerous homes that either have started off as a short sale or converted from a loan modification. Even though we are not allowed to provide legal advice, we can offer options that might be a better solution. Homeowners may have received a principal reduction, meaning that the lender has forgiven a portion of the loan, especially if the loan remains underwater (where the owner owes more than the home is worth). Once a homeowner has been approved for a loan modification, making the switch to a short sale can be fairly easy, as long as you’re dealing with a reputable and knowledgeable real estate agent. Because the lender has already approved the borrower for a hardship due to the loan modification, the switch should be fairly easy. The homeowner will need a short sale agent in order to list the home, find a buyer and submit the offer before the lender will approve the short sale however, most lenders will be ready to approve a short sale, especially if most of the short sale work has already been done.

Whether you are looking into a loan modification or a short sale, switching from one to the other if you want to sell the home or keep the home can be fairly uncomplicated but it does take the knowledge and reputable resources of a qualified short sale agent and lender that’s willing to work with you. Do you have more questions? Feel free to give me a call at any time and let’s work through this together to find the best option for you.