How to Write a Hardship Letter for Your Naperville Short Sale

How to Write a Hardship Letter for Your Naperville Short Sale

What is a hardship letter and how do you write one for your Naperville short sale?

Before a lender approves a short sale, the lender will ask the seller to submit a hardship letter. A hardship letter is a statement of facts describing how the seller‘s hardship came about. It is an appeal to the lender to approve the short sale of your home since you can no longer afford to make the monthly mortgage payments.

Writing a hardship letter is not rocket science. It’s really simple. If you can write a letter to a friend, then you can write a hardship letter for your Naperville short sale.

What Makes a Good Hardship Letter?

Most people think that a hardship is based only on financial issues, but this is far from the truth. Any situation that makes it difficult for a homeowner to continue paying the monthly mortgage will qualify as a hardship.

The seller’s reason for a hardship should not be solely due to the decline in the value of their home.  While an underwater home is a qualification for a Naperville short sale, it should not be the only reason you are asking the lender to approve your short sale.

Ask yourself this simple question before you write your letter: “Since you took out the home loan, has your situation or financial capability changed?” If your answer is “no,” the bank may think that you can still afford to pay your monthly mortgage or if they do grant the short sale, they might ask you to pay the deficiency since you are still capable.

If your answer is “yes,” then check if your situation falls under one of these situations that lenders accept as a qualified hardship:

• loss of employment
• reduction of income (or loss of employment of spouse)
• job relocation
• medical emergency or illness
• death in the family
• divorce or separation
• military service
• having an adjustable-rate loan
• incarceration
• unexpected home repairs or maintenance
• increased expenses and huge debts

Reasons that lenders do not accept as valid hardship and you should not include in your hardship letter are:

• big purchases like a boat or an expensive family vacation
• moving when you don’t have to
• you don’t like your neighbors or the home

Lenders do not consider these as valid hardships since they could be reasonably avoided and overcome. The keywords to remember in stating a reason for hardship is the situation must be “inevitable” or “unavoidable,” something beyond the homeowner’s control.

Writing the Hardship Letter

To help you outline your hardship letter, you have to explain three things:

• How you got into your present hardship
• What you have done so far to try and overcome or get out of the situation
• Why your situation is permanent and there is nothing you can do to change it

It will also be useful to include the following to substantiate your hardship:

• Numbers and percentages. This is a clear and simple explanation of loss or reduction of income or cash flow. Instead of saying you need to borrow money just to pay your mortgage, you can state the dollar amount and source of the debt like “I have borrowed $15,000 against my credit card just to make my mortgage payments for the past 5 months, and I have maxed out all my credit cards.”

• Honestly present your worst situations and appeal to emotion. Be truthful. If your beloved dog of 10 years has cancer and the vet bills are adding up, or you only have 3 hours of sleep a night since you took on two jobs to pay for your sick mother’s mounting medical bills and to take care of her, make sure to paint the worst picture and keep going downhill while maintaining honesty. It should sound like a desperate plea for an unavoidable and hopeless situation in order to appeal to the lender’s emotion. Have your Naperville short sale agent read your letter and if your agent doesn’t feel sorry for you after reading it, then you need to improve your letter.

• Use plain and simple words. It should be simple enough for a 6th grader to understand. Remember you aren’t writing a resume cover letter to impress, but a plea for the lender to consider your hardship and approve the short sale.

If you feel you are qualified for a Naperville short sale and need guidance in writing your hardship letter, please contact certified Naperville short sale agent Teresa Ryan on 630-276-7575 for a free consultation.

Teresa Ryan

Broker/Owner, CDPE

Ryan Hill Realty

1001 E. Chicago Ave., Ste. 103

630-276-7575

TRyan@RyanHillRealty.com