What Is a Hardship Letter - and Why Does the Lender Need It?
- Scott Savage
- Jul 12
- 2 min read
If you’re considering a short sale, the lender will almost always ask for a hardship letter.
That request alone makes many homeowners nervous.
They think:
“I don’t want to beg.”
“I don’t know what to say.”
“What if I say the wrong thing?”
“I don’t want to share my personal information”
The good news?
A hardship letter is not about begging - it’s about explaining reality.
What Is a Hardship Letter?
A hardship letter is a simple written explanation that tells the lender:
What happened
Why you fell behind
Why you cannot catch up
Why selling the home is the best solution
It gives context to the numbers.
Lenders don’t just look at financial statements - they need a human explanation of why the loan failed.
Why Lenders Require a Hardship Letter
From the lender’s perspective, approving a short sale means:
Accepting a loss
Writing off part of the loan
Explaining that decision internally and to investors
The hardship letter answers one key question: “Why should we accept less than we are owed?”
Without it, your short sale file is incomplete.
Common Acceptable Hardships
Lenders are realistic. They approve short sales every day for reasons like:
Job loss or reduction in income
Medical issues or medical bills
Divorce or separation
Death in the family
Business failure
Increased mortgage payments
Property taxes or insurance increases
Relocation or forced move
The hardship does not have to be dramatic - it just has to be real and documented.
What a Good Hardship Letter Includes
A strong hardship letter is:
Honest
Short
Clear
Factual
Written in plain language
It should explain:
What changed financially
When it happened
Why the situation is not temporary
Why a short sale is necessary
What a Hardship Letter Is NOT
It should NOT:
Blame the lender
Be angry or emotional
Include unnecessary details
Sound exaggerated or false
Promise future payments you can’t make
Lenders respond better to calm, straightforward explanations.
How Long Should It Be?
Shorter is better.
Typically:
1 page
3-5 short paragraphs
Clear and direct
This is not a legal brief or a life story.
Example (Simplified)
“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 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 all parties.”
That’s it. Simple and honest.
Why Professional Guidance Matters
Your agent or short sale specialist will:
Help you frame the hardship correctly
Make sure it aligns with your financials
Avoid language that could hurt approval
Keep it compliant with lender expectations
This alone can make the difference between approval and denial.
Final Thought
A hardship letter is not about shame.
It’s about clarity.
It explains the story behind the numbers and gives the lender a reason to say “yes.”
If you’re already struggling, this is one step toward relief, not judgment.
- And yes, they stay confidential in the lender’s file.
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