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Understanding Your Financial Situation
Are you facing financial difficulties and struggling to keep up with your mortgage payments? You may be considering your options: Foreclosure or Short sales. Both can have an important role in your financial future, so it is important to understand the differences and make wise and constructive decisions.
What is Foreclosure?
So, what is a foreclosure? This is typically involuntary and occurs when a homeowner fails to make consistent payments, leading to significant arrears – payments that are overdue or unable to commit to pay by the end of a period – a debt. After the borrower misses a certain number of monthly payments, the mortgage holder (the bank or lender) files a lawsuit to take possession of the house. In order to retrieve the money owing to them on the mortgage, the lender seizes the mortgage property and sells it during a foreclosure.
Key Points that need to remember about foreclosure:
Lender’s Control: Lender initiates the process.
Severe Credit Impact: Can totally damage your credit score
Potential Liability: May owe the difference between sale price and loan balance.
Short Sale
What is a short sale? A short sale is a planned process or voluntary and it occurs when a homeowner sells their property for a price significantly lower than the mortgage balance. For instance, if a homeowner has a mortgage balance of $500,000 but must sell the house quickly for $425,000 due to a financial crisis, the homeowner still owes the remaining mortgage amount ($75,000) along with any related selling expenses. This situation often leads to negotiations with the lender, who may agree to accept the lower sale price and forgive the remaining balance. However, homeowners should be aware that a short sale can have implications for their credit score and tax obligations.
Key Points that need to remember about short sale:
Borrower-Initiated: Propose selling your home for less than mortgage.
Less Severe Credit Impact: Generally less damage to your credit score than the foreclosure
Complex Process: Required lender approval and negotiation.
What is the duration of the complete foreclosure process?
The typical duration from the initial public announcement to the conclusion of the foreclosure process can vary. In the fourth quarter of 2021, U.S. properties that went into foreclosure had been undergoing the process for an average of 941 days.
Reasons a Lender Might Decline a Short Sale
A lender might decline to authorize a short sale under the following conditions: 1) if the homeowner has not yet defaulted on mortgage payments; 2) if they believe that foreclosing on the property could yield a higher recovery; 3) if there is a co-signer they can pursue for payment.
Which Choice Is Best for You?
The most suitable choice for your circumstances depends on several factors, including your financial situation, the equity in your home, and your willingness to work with your lender. It’s important to seek advice from a licensed real estate agent or housing counselor to evaluate your options and make informed decisions.
Remember that taking action early is vital. Avoid waiting until the last moment to request assistance. By addressing your financial challenges proactively, you may be able to prevent foreclosure and protect your future financial stability.
Disclaimer: This content is intended solely for general knowledge and informational purposes and does not serve as professional financial or legal guidance. It is important to seek advice from qualified experts to address your individual situation.
If you are experiencing financial challenges and need assistance, please feel free to contact us! We are happy to help you! Timely action can significantly impact the security of your financial future.
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Please contact our office at 313-300-7114
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