When you request a short sale, deed-in-lieu, or pretty much any other modification to your home mortgage, you’ll have to submit a financial hardship letter.
A hardship letter can make or break your chances of getting the bank to agree to a loan modiifcation or short sale, so you’ll want to make sure you avoid some of the common mistakes homeowners make when writing this letter.
Mistake #1: Tone and Presentation
When writing a hardship letter, many people think they are supposed to go on and on about their hardships. You do, indeed, need to convey your hardships, but this is still a business letter and needs to be professionally expressed and formatted.
- Do make your plight sound dire, but don’t go on for pages and pages with all the details.
- Do make it clear this is your last resort, but don’t make the lender think action on their part won’t be enough to help your situation.
You want to give the lender confidence that you can, with their help, recover and make your full payments thereafter without defaulting again. Unfortunately, many people who do obtain modifications end up in default again within one year.
Lenders get frustrated with this, so give your lender a reason to be confident in you. Lenders also get frustrated with ten page diatribes, so keep it short and nice.
Mistake #2: Leaving Out Information
Don’t forget the basics! This means your account number, contact information, and the address of your home. Explain not only why you’re behind or about to fall behind on your mortgage, but also how you would be able to recover if your loan was to be modified.
This again comes back to confidence—you need the lender to know you are dedicated to saving your home, and what form that dedication takes. Explain whether your situation is likely to be temporary or permanent and why.
Mistake #3: Leaving Out the Numbers
This seems like a given, but lots of people flat out skip this part, perhaps because budget forms are usually included in the package. You’d be remiss not to give a brief overview of your financial situation with numbers, just to make your point.
Put together a brief table of your monthly income and expenses, and make it clear how much you’re in the red, and how much you’d need to get back in the black.
Include your necessary monthly expenditures:
- Medical bills
- Electric bills
- Internet, etc.
Following these tips should help you to avoid the many problems homeowners run into when writing a hardship letter!