Stopping a Foreclosure with a Short Sale
Foreclosures can be a rather difficult process. Not only are you losing your home, but you are also facing severe credit consequences. Many people do not realize that this can be stopped using real estate short sales. These are sales that are made quickly for an amount lower than the amount of money owed on the mortgage. In many cases, the lender negotiates with the borrower to accept the lower amount of money to clear the debt. There are many advantages to real estate short sales for both the borrower and the lender.
Lenders like real estate short sales because they are not as costly as foreclosures. There are many fees and costs associated with a foreclosure. In addition, the bank does not often get as much money in a foreclosure as they do in a short sale. Knowing that the chances of someone repaying the deficiency, or amount left over after a foreclosure, in a timely manner are slim, the lender wants to get as much money as possible out of the liquidation of the home.
Borrowers like real estate short sales because they are less damaging than foreclosures. A foreclosure can ruin your credit for a long period of time. This can affect many things in life, including your ability to get another mortgage or other lines of credit in the future. In addition, a poor credit score can effect your current or future employment, as well as things like your ability to gain security clearances.
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After a short sale, when will you
qualify for a mortgage: Under
certain circumstances, you may qualify
right away, but normally you will
qualify in three years assuming you meet
all parameters of the loan. |
However, real estate short sales do not come with downfalls that are as
severe. Like foreclosures, short sales register on your credit score, but the impact isn't as significant. Your mortgage may show late payments, but it will also show as “paid as agreed” or “negotiated.” In addition, you can expect to become eligible for a Fannie Mae home loan in three years and you may qualify for the FHA home loan immediately. Foreclosures require you to wait five to seven years for a conventional loan and three years on government loans. This is a huge benefit for home owners. Ask a lending expert in your area for specific qualifications.
A real estate expert can help you get started on a real estate short sale. In order to stop the foreclosure, you have to get the bank to request a postponement of the foreclosure or trustee sale. Generally lenders will only go along with a postponement if a short sale is already in progress, so it is important to move quickly. Once the foreclosure sale date has been postponed, you can complete the short sale and negotiate with the lender on the terms of accepting the lower amount.
While not all lenders will give you the postponement, most lenders will stop a foreclosure in its tracks if they know a short sale is in progress. This is because real estate short sales are more beneficial to them than foreclosures. Therefore, it is not difficult to take this route to save your credit and owe less or nothing to your lender when the process is complete.
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After a foreclosure, when will you
qualify for a mortgage: Under
certain circumstances, you will qualify
in three years, but for conventional
loans you will have to wait five to
seven years. |
Disclaimer: We are not
attornies; we are mortgage bankers. The above
article should not be considered legal advice
under any circumstances. Before making any
decisions about considering a short sale, consult a licensed
attorney for legal advice. All of the
information contained on this page should be
very useful to anybody who wants the bottom line
when it comes to short sales and foreclsoures.
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