Dealing With Two Loans on a Short Sale
Back in the early 1990s, home buyers financed the purchase of a new home by coughing up a down payment. It wasn't always 20% down, but it was enough to give buyers instant equity, an incentive to protect that equity and more than likely only a first mortgage.
Fast forward 10 years, lenders began handing out loans like tossing candy off Mardi Gras floats. Almost anybody who wanted to buy could get 100% financing, and those loans involved two lenders. There is nothing inherently wrong with 100% financing -- the VA guarantees them all the time for veterans. But the problem arises when property values fall and sellers can't make their mortgage payments or otherwise need to sell. In these instances, if there is an 80% loan-to-value first mortgage, there might not be enough equity in the home to pay off the second mortgage lender, who once held a 20% equity position and now holds air.
Dealing with two lenders is tricky, but there are ways to get a second mortgage lender to release the loan . . . read more about Short Sales With Two Loans.
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Comments
Excellent articles - sad to say we’re seeing 50%+ of the homes on the market are short sales and understanding the process is very important.