How To Choose Between A Short Sale And Foreclosure
Facing mortgage debt problems is a stressful time. Between the emotional toll of defaulting on a mortgage and your options seeming to run low, it can be a difficult time for anyone. While the decision between entering the short sale process and facing a foreclosure head on is not an easy one, there are a few things to consider that may help make the decision easier.
Lender Flexibility
One of the most influential factors of deciding between the two options is your lender's flexibility. The mortgage lender has the most power in negotiating mortgage debts or governing the foreclosure process. However, most lenders do prefer not to enter a foreclosure as they stand to gain more of their money back through a short sale.
The foreclosure process isn't just a hassle for you; the lender also must work harder in efforts to recoup the money owed on the debt. When deciding, contact your lender to discuss their preference and determine if they are willing to halt the foreclosure process while you pursue a short sale.
Financial Considerations
The process can be more expensive for you than a foreclosure in the sense that you will be allowed to stay in the home, and mortgage, while you attempt to sell the property. If you are having trouble maintaining the mortgage payment a short sale may further complicate your finances during the time it takes to sell the home. Foreclosures on the other hand are relatively quick and easier on the wallet. However, you may end up responsible for paying the deficiency balance on a foreclosure.
Credit Damage
A big fear among borrowers is credit damage resulting from the foreclosure process. It is true that a foreclosure can damage your credit and cause financial problems for many years to come. Foreclosures produce a longer lasting credit problem as future lenders may flag you as a risky borrower when reviewing your credit history. It isn't uncommon to have trouble with renting or purchasing a new home after a foreclosure.
A short sale is less likely to due long term damage to your credit, but may cause a temporary credit hit throughout the short sale process. The reason is that your mortgage debts sit delinquent longer, causing a temporary increase in credit damage. Once the home is sold, the delinquent status is removed and the credit damage is alleviated to an extent. Although a short sale will be reflected on a credit report for many years to come, most lenders do not consider short sale borrowers to be as much of a risk as one that has entered foreclosure.
Lender Flexibility
One of the most influential factors of deciding between the two options is your lender's flexibility. The mortgage lender has the most power in negotiating mortgage debts or governing the foreclosure process. However, most lenders do prefer not to enter a foreclosure as they stand to gain more of their money back through a short sale.
The foreclosure process isn't just a hassle for you; the lender also must work harder in efforts to recoup the money owed on the debt. When deciding, contact your lender to discuss their preference and determine if they are willing to halt the foreclosure process while you pursue a short sale.
Financial Considerations
The process can be more expensive for you than a foreclosure in the sense that you will be allowed to stay in the home, and mortgage, while you attempt to sell the property. If you are having trouble maintaining the mortgage payment a short sale may further complicate your finances during the time it takes to sell the home. Foreclosures on the other hand are relatively quick and easier on the wallet. However, you may end up responsible for paying the deficiency balance on a foreclosure.
Credit Damage
A big fear among borrowers is credit damage resulting from the foreclosure process. It is true that a foreclosure can damage your credit and cause financial problems for many years to come. Foreclosures produce a longer lasting credit problem as future lenders may flag you as a risky borrower when reviewing your credit history. It isn't uncommon to have trouble with renting or purchasing a new home after a foreclosure.
A short sale is less likely to due long term damage to your credit, but may cause a temporary credit hit throughout the short sale process. The reason is that your mortgage debts sit delinquent longer, causing a temporary increase in credit damage. Once the home is sold, the delinquent status is removed and the credit damage is alleviated to an extent. Although a short sale will be reflected on a credit report for many years to come, most lenders do not consider short sale borrowers to be as much of a risk as one that has entered foreclosure.
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