What Is A Financial Hardship Letter?

For a homeowner to qualify for a short sale there are several steps that must take place before it can be approved. One of the requirements for a short sale is for the homeowner to have a financial hardship. In order for this to be established to the satisfaction of the mortgage holder the seller must present them with a hardship letter. For the unprepared this step may seem daunting as it involves revealing situations that most people would feel would be best left hidden however, with the right guidance you can complete a financial hardship letter with no problem.

What is a Hardship?

Before you can begin to write your letter you need to fully understand what the bank may consider to be a hardship. Most people think of hardship as purely financial however there is more involved than whether or not you can make your mortgage payments. Other contributing factors should also be considered to determine hardship. The fact is that anything that may make it difficult for you to make your payments could qualify as a hardship. This includes any change of circumstances; unemployment, pay cuts, illness or injury, job transfer, change in marital status, military service, or death can all have a bearing on your inability to meet your financial obligations.

What the bank does not want to see in your letter is that you no longer want to pay the mortgage because it is no longer profitable or inconvenient.

The Three Basics

Every hardship letter needs to include three basic things. Of course the bank is interested in your present financial circumstances but it is likely more interested in the events that lead you to this place. Was it because of negligence on your part, was it deliberate, or through circumstances beyond your control. You’ll also want to outline any steps that you’ve taken to avoid the situation or to change your circumstances and finally, why it cannot be changed in some way. This information can reveal to the lending institution the extent you’ve gone to in order to resolve the problem, which can end up in a favorable judgment in the end.

You May Also Want to Include

Consider your hardship letter a plea for help so throw in anything that could give you a favorable judgment. The more detailed the letter the better the picture you’ll present. Include numbers and percentages that support your statements and be as thorough as possible. Rather than saying you’re borrowing money to pay off debt which can be vague, detail the exact amount of your debt and what you’ve borrowed so that the bank can get a clear picture of your dilemma. Remember that you want to be as thorough as possible so that the bank can see exactly what your true circumstances are. It is better to err on the side of too much information than to leave something out.

Avoid Mistakes

Writing this type of letter is never easy and the process involved can bring to light many things that you may not have realized before. Do not allow your feelings to get in the way of the help you seek. Some people will try to rush through the letter in an effort to get through the process and in the end miss some important details that could work in their favor.

Keep your words simple and easy to understand, there is no need for long and detailed prose to get your point across. Make sure that you don’t include in your letter negative actions that may have caused your current situation. Actions like drug or alcohol abuse, gambling, or an extended jail term may cast a bad shadow on your plea for assistance. They want to see that you have demonstrated some level of responsibility in trying to avoid your present situation and not that your finances were frivolously squandered away somehow.

Above all else, don’t use a form letter. Professionals can spot a copy the same way you can detect an automated voice on the phone. Don’t try to copy from someone else’s letter; it would be much better if your letter was completely constructed by you. The act of creating your own expressions to describe a situation that is unique only to you will carry much more weight than using some template that you found while surfing the net.

The idea of writing a hardship letter may not be a job that you’re looking forward to but if you can express your feelings and circumstances in words you can put them down on paper. Remember this is your opportunity to explain your reasons for your present circumstances and a means for breaking free from a major burden. Plead your case well and your will most likely find a favorable hearing ear that can help you.