What Is a Hardship Letter, and Why Does the Lender Need It?

If you're considering a short sale, your lender will almost always ask for a hardship letter. Many homeowners worry about it: I don't want to beg. I don't know what to say.

Here's the good news. A hardship letter isn't about begging. It's about explaining what happened.

What a hardship letter is

It's a short written explanation that tells the lender:

• What happened
• When it happened
• Why you can't catch up
• Why selling is the best solution

Lenders don't just look at numbers. When they approve a short sale, they're accepting a loss and have to justify it to the investor who owns the loan. Your letter gives them the reason.

Common hardships lenders accept

• Job loss or reduced income
• Medical issues or medical bills
• Divorce or separation
• A death in the family
• Business failure
• A higher mortgage payment, property taxes or insurance
• A job relocation

Your hardship doesn't have to be dramatic. It just has to be real and supported by your financial documents.

What makes a good letter

Keep it honest, calm and short, usually one page and three to five short paragraphs. Explain what changed financially, when it happened, why it isn't temporary and why a short sale is necessary.

Don't blame the lender, exaggerate or promise payments you can't make.

A simple example

"I fell behind on my mortgage after my income was reduced. I tried to catch up but was unable to. I have explored other options, including a loan modification, but they were not successful. I can no longer afford the home, and selling it through a short sale is the best solution for everyone involved."

That's it. Simple and honest.

You don't have to write it alone

We help every client write their hardship letter and make sure it matches their financial documents. It stays in the lender's file, and it's one step toward relief, not judgment.