You can short sale your house if you have an FHA loan. FHA will forgive you of all the debt and does not ask for a promissory note. That's the case if you are short selling because of a legitimate hardship. Here is how the process works on an FHA short sale.
You send all of the standard paperwork to initiate a short sale. You will need to include copies of your last two bank statements, last two years tax returns and last two pay stubs. They will also want a hardship letter and financial worksheet filled out. The short sale lender will start out reviewing your information. Then, they will order an FHA appraisal.
An FHA appraisal has to be done by an FHA appraiser. Only certain appraisers are approved by FHA. Once the appraisal comes back and they lender had reviewed your documentation, they will issue an "approval to participate." At that date, they are allowed to approve any offer that nets 88% of the appraised value. After 30 days has passed they are allowed to accept 86% of the appraised value.
Finally, after 60 days have passed they are allowed to accept an offer that next 84% of the appraised value. Here is something that makes FHA short sales easier than normal short sales. You can start the process before you get an offer from a buyer. Once you get an offer from the buyer, then the lender has 5 working days to approve or deny the short sale offer. If the offer meets the necessary parameters, then the rules state that they must approve it. To get a copy of the exact rules for FHA short sales, then simply Google, "Mortgagee Letter 2008-43."
These clearly laid out rules make FHA short sales so much more clear and transparent compared to short sales with other loan types.
You send all of the standard paperwork to initiate a short sale. You will need to include copies of your last two bank statements, last two years tax returns and last two pay stubs. They will also want a hardship letter and financial worksheet filled out. The short sale lender will start out reviewing your information. Then, they will order an FHA appraisal.
An FHA appraisal has to be done by an FHA appraiser. Only certain appraisers are approved by FHA. Once the appraisal comes back and they lender had reviewed your documentation, they will issue an "approval to participate." At that date, they are allowed to approve any offer that nets 88% of the appraised value. After 30 days has passed they are allowed to accept 86% of the appraised value.
Finally, after 60 days have passed they are allowed to accept an offer that next 84% of the appraised value. Here is something that makes FHA short sales easier than normal short sales. You can start the process before you get an offer from a buyer. Once you get an offer from the buyer, then the lender has 5 working days to approve or deny the short sale offer. If the offer meets the necessary parameters, then the rules state that they must approve it. To get a copy of the exact rules for FHA short sales, then simply Google, "Mortgagee Letter 2008-43."
These clearly laid out rules make FHA short sales so much more clear and transparent compared to short sales with other loan types.