Is a short sale better than a foreclosure?
A short sale is one in which 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 between the lender and the owner.
Foreclosure involves a lawsuit. This is the process in which the lender seeks to take a homeowner’s property to satisfy a debt. If you received a letter from the lender notifying you that they are taking legal action, or you received a letter from an attorney informing you that they are requesting a foreclosure sale of your real property, you may consider a short sale.
The impact of foreclosures
Defaults and claims will appear on your credit bureau report, and you can decide which process will be least damaging. A foreclosure generally 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 lawsuit
• A very low credit score
• Potential challenges for current and future employment
• Possible challenges in obtaining a rental
• A loss of security clearance
• The inability to obtain financing for housing or vehicle financing in the future.
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 pay their mortgages with the least amount of damage to their credit profile.
The psychological effects of a foreclosure
Help has arrived. A short sale eliminates 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 may soon be on your way to a more financially stable future.
If houses in the same neighborhood sold for less than your mortgage balance, you are probably a valid candidate. If your income has recently decreased and you have limited savings, you may be a good candidate.
An own budget
Paying with a credit card works more or less on the same principle. With credit available to you, shopping is much easier. It really doesn’t make sense to shop for bargains and then swipe 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 the goods. It’s easier to keep track of your expenses when you’re handling cash, but you can’t avoid overspending. A credit card can be useful, but it is advisable to destroy it if you cannot control it.
The best way to keep track of your spending habits is to keep a proper budget and keep track of your income and expenses.