Let’s all be honest, right now there is a lot of talk about foreclosure in the media. Thousands and thousands of people across the country are going through the process.
First of all, lets explain what foreclosure is; Foreclosure is where a homeowner defaults on their mortgage (meaning they no longer pay their mortgage) and the lender takes possession of the property that was used as collateral for the debt. It can be an ugly process and one which can be avoided.
The most obvious advice to avoiding foreclosure is to live within your means and not take on an overly burdensome mortgage in the first place, however those facing foreclosure can’t change the past! Homeowners across the nation are in this very situation, often having mortgages they can no longer afford to pay on for a home that is worth less than the balance of the loan.
Remember, a foreclosure can show on your credit report for up to 10 years and can knock your credit score substantially, by as much as hundreds of points. While it is not a matter of life or death, it is something which will put a dent in your financial future.
So what are your options to avoid foreclosure? Well you could always consider a short sale.
What is a short sale?
A short sale is a method whereby the homeowner agrees with their lender to sell their home short of what is owing on it. Many homeowners have homes that are worth less than their mortgage balance, meaning that they could not sell in a traditional sale without coming up with a substantial amount of cash, so other than allowing a lender to foreclose they can agree a price with their lender to sell the home for a set amount that the lender will take to eliminate the loan outstanding on the home. Sure, it means that the homeowner will be left with nothing from the sale, but it means that they have avoided foreclosure and have taken a route which causes much less damage to their credit, with in many cases the knock in points being a fraction of that of a foreclosure and in most cases allowing a new home purchase within a couple of years.
Remember: A short sale is not a decision to make lightly, make sure you work with a real estate professional who is proficient in the short sale process who knows the intricate details on working and negotiating with your bank on your behalf.