It is not uncommon for people to quick cash house sale properties before clearing the mortgage. When your property is in a mortgage, it simply means that you are still in arrears to your lender because you have an outstanding loan balance.
Most of the conventional mortgages run for as long as 30 years, which explains why most homeowners resort to selling their homes when moving out before the loans are fully paid. There are procedures and considerations that you should follow before selling a house while in a mortgage which includes
- Get in Touch with a Realtor
The first step is to find a realtor to establish your mortgage payment status and terms of payment. This is important because you will be able to determine your allowable borrowing limits. You will also calculate the value of the house so that you establish the best selling price to ensure the mortgage is paid in full. Mortgage lenders always give payoff quotes that are valid for an agreed period.
- The Simple Sale Process
Ideally, a homeowner should sell the house at a value that is enough to pay off the outstanding loan balance quickly. During the sale, your agent will work with your lender and a real estate attorney to draft the loan documents and a statement of settlement.
After the closing, the funds received are used to clear the outstanding loan balance and pay the agent and the attorney. The remaining amount goes to your account as your net sales gain.
- Short Selling
In some rare situations, your home value may be lower than your mortgage value. If you want to proceed with the sale, then you need to get in touch with your bank to arrange for the purchase. In a short selling process, the lender commits to accept a reduced amount of loan payoff to enable you to complete the transaction.
- Important Considerations
In rare situations, when the homeowner has an assumed mortgage, the lenders will allow the buyer to inherit the existing mortgage only if he meets specific income requirements. This is an appealing arrangement to the buyers when their loan rate does not match the market value.
In case the homeowner wants to move out before the sale of the home, he may be required to take a new mortgage on another new house, which is a huge financial challenge. In such situations, some lenders allow a higher DTI ratio (debt to income) of 50-55% if you have a higher income level. The homeowner can take a bridge loan for a new home awaiting the sale of his current home.
Selling a house before paying off your mortgage is possible, depending on the current situation. Before you sell the home, you need to know your mortgage payment terms and ensure that you can cater for all the expenses associated with the selling process.
You should know all your options so that you make the right decisions whenever a problem arises. Whenever in doubt, consult your mortgage lender and a real estate lawyer to help you solve legal issues.