subject: Difference Between Short Sale And Foreclosure [print this page] The current economic scenario is quite bad and a number of homeowners are currently facing an uphill task to make the mortgage payments. Most homeowners have seen the value of their homes fall across the country. Whether its an upscale country house or an apartment or a rural home, homeowners are in a similar situation. Worse is the case scenario, whether the value of their homes has fallen drastically and the homeowners have to still pay the high mortgage loan payments. It doesnt make sense and the homeowners are stuck with it or else they will be foreclosed.
Throughout the country, the value of the properties has touched a bottom and is in the price range of 2000-2002 price values. Due to such circumstances, the homeowners are facing an unwater mortgage, whether the value of their homes is much less than the mortgage loan that they have taken on their homes. Further with many companies announcing a cut in their personnel, wage reductions and other financial hardships, homeowners are currently finding it extremely difficult to make the payment.
Understanding foreclosure
In cases, where the homeowner is finding it difficult to make the payments and stops making the payment, they are at a risk of foreclosure. Banks and lenders can take back the property / home for the nonpayment of the mortgage loan and this is known as foreclosure. It has been estimated that 1 out of 7 homes are still being foreclosed as homeowners arent aware of the solutions that are available to them. In most cases, homeowners wont do anything or even contact their lenders if they are in financial trouble. This is the worst thing to do and this can lead to foreclosure. But this doesnt necessarily have to be the case scenario. There are several options that are available for those that are unable to make the mortgage payments and yet want to stop the foreclosure process.
Understanding short sale
One of the ways to avoid foreclosure is a short sale. In a short sale, the homeowner sells off the property to another buyer with the consent of the lender. The sale value of the home is usually less than the outstanding mortgage loan amount. However, the lender is willing to forgo the deficient amount. Short sale can be organized under HAFA, HAMP or HARP or can be done by the lender / creditor.
Benefits under short sale
Short sale is less damaging to the credit score of the person rather than foreclosure. The effects of foreclosure can stay on the credit report for period of 5 7 years. Short sale will usually lower the credit score by 50 points.
After a short sale, the homeowner can qualify for taking a mortgage loan in 2-3 years. In case of foreclosure, the wait time can be 7 10 years.
In a short sale, the mortgage amount is recorded as full and settled.
Under HAFA, the homeowner can receive up to $3000 as relocation expenses.
