A short sale is a foreclosure avoidance program that allows a borrower to sell their home for less than they own on their original mortgage. A short sale requires the approval of the lender who will retain the option to forgive the remaining debt or seek compensation for the unpaid debt. Those who are borrowers of Fannie Mae may be approved for a short sale so long as certain documentation and proof of hardship is provided. To prevent delays in the review process, anyone considering applying for a Fannie Mae short sale should make every effort to gather the following documentation:
Proof of Income: No more than 60 days old. This will be used to establish how much money a person receives every month.
Proof of Child Support Payments: Whether it is paid or received, it must be shown. Use a copy of the order to pay child support or a letter from the person who pays the child support that lists the exact amount of monthly payments.
Legible Pay Stubs: Must show the name and social security number of the person as well as the dates of pay, the rate of pay, and any deductions.
Proof of Rental Income: If the person applying for a short sale is a landlord or renter, they must provide a signed and dated letter from the renter that shows how much rent is paid monthly.
Proof of Non-Obliger Income: A non-obliger is a person who has interest in a property but does not have any responsibility to the lender. In some states, a spouse will be a non-obliger. If a person is living in a property with the borrower and contributes an amount of money to the household every month, a signed and dated letter from the non-obliger is needed that lists the amount of their contribution.
Profit and Loss Statement: This is mainly for business owners, it will show the profits and losses of the business.
Proof of Social Security: If the homeowner is receiving social security benefits, a copy of the “award letter” is needed. If the funds are deposited via direct deposit, a copy of a bank statement showing the deposits will suffice.
Copy of Credit Report: The lender can pull this, but it is good to know that it will be pulled. It must be current within the last 90 days.
Completed Financial Worksheet: This is completed by the homeowner and is a worksheet that details how the homeowner will plan on surviving without the burden of their mortgage. The lender wants to see that the borrower will make an honest effort to reduce their debt and not abuse the program.
Letter Explaining the Reason for the Default: Since most short sales occur after a loan has defaulted, the bank wants to hear a good reason for the default. Some life events can’t be prevented, and lenders understand that. They just want to know that if they forgive any remaining debt that it is for a good reason.
The list of required documentation needed to apply for a Fannie Mae short sale may seem daunting, but if the above outline is treated as a checklist a homeowner will find the gathering of the required documentation a much simpler task. Homeowners are advised to consult with a local financial / real estate attorney who can assist with the preparation of required letters to ensure the greatest amount of ease possible while moving through the Fannie Mae short sale application process.