Is a short sale better than a foreclosure?
A short sale is where the proceeds from the sale of the property are less than the balance of the mortgage. Unpaid balances owed to creditors are called deficiencies. Once the application is approved by the lender, no deficiencies are allowed after the process, unless specifically agreed upon between the lender and the owner.
Foreclosure involves a lawsuit. This is the process in which the lender seeks to take an owner’s property to satisfy a debt. If you received a letter from the lender notifying you that he is taking legal action, or if you received a letter from an attorney informing you that he is requesting a foreclosure sale on your real estate, you may want to consider a short sale.
The impact of foreclosures
The defaults and laws will show up on your credit bureau report, and you can decide which process will be less damaging. A foreclosure typically stays on your credit report for seven to ten years, often with a devastating impact on your future finances.
Foreclosures often have far-reaching consequences, such as:
• Putting you at risk of a high deficiency judgment
• A very low credit score
• Potential challenges for current and future employment
• Potential challenges in obtaining a rental
• A loss of security clearance
• Inability to obtain future home or vehicle financing
Millions of homeowners chose the relief offered by short sales. The impact of this choice is less damaging on a credit report. You can qualify for another mortgage in as little as 24 months.
Advantages of Short Sales
Short sales provide homeowners with an incredible opportunity to avoid foreclosure. This process offers relief to homeowners who can no longer afford their mortgage payments with the least amount of damage to their credit profile.
The psychological effects of a foreclosure
Help has arrived. A short sale removes the psychological effect of foreclosure. Foreclosure is accompanied by anxiety and stress. These psychological symptoms can lead to depression. Clinical depression often requires medical treatment. A short sale can stop legal action against you, and you can soon be on the path to a more financially stable future.
If houses in the same neighborhood sold for less than your mortgage balance, you’re probably a good candidate. If your income recently decreased and you have limited savings, you may be a good candidate.
An adequate budget
Paying by credit card works more or less on the same principle. With credit available to you, it’s much easier to shop. There really is no point in buying bargains and then swiping a credit card with an 18% interest charge.
Cash is more real and you have to take it out of your wallet to pay for goods. It’s easier to keep track of your spending when you use cash, but you can’t avoid overspending. A credit card can be helpful, but it’s a good idea to shred it if you can’t control it.
The best way to track your spending habits is to maintain a proper budget and track your income and expenses.