Short Sale – The Best Option for Distressed Homeowners

Homeowners are said to be “struggling” or in “distress” if they are having trouble meeting their mortgage obligations. If you are one of these unfortunate individuals, you should know that until your lender takes away your home and asks you to vacate, you can fight foreclosure every step of the way since you are the owner.

In fact, to make it easy for you to choose which option will allow you to solve your mortgage problems, the American Bankers Association has come up with something similar to a score card to help homeowners like you. For lenders, they would prefer you stay and work with them in order to avoid foreclosure.

Of course, not all banks are open to a loan modification and drag their feet when the time to negotiate comes. This is perhaps the reason why some homeowners choose between a strategic default and a short sale. The first option will mean walking away even if you can still afford to pay your mortgage and the second one involves selling the home at an amount which is less than what you owe.

Here is ABA’s analysis:

Mortgage Modifications – This option will certainly be ideal for the following reasons. One, you will be able to pay your mortgage since the monthly payments will be lower. Two, there is no need to think about any legal actions taken against you since you will still be fulfilling your contractual obligations. Of course, you get to stay in your home, which is probably the top reason why you would want this option to work out. As far as disadvantages go, there is a chance the loam modification application will not be approved and even if the lender agrees, it might still damage your credit score. The other issue is you will still be under water significantly.

Strategic Default – When you choose this option, one benefit is there will be no more mortgage payments to worry about. But the downside includes significant damage to your credit as well as the huge possibility your lender will go after your assets.

Short Sale – If you are already behind on your mortgage payments or will not be able to make the next payment, you need to look at this option. The benefits include not having to worry about mortgage payments and there would be no legal actions against you in some cases. In some cases the lender agrees to forgive the difference or not pursue a deficiency judgment. You will also be able to avoid a foreclosure entry on your credit report which could cost you much, in terms of credit score. To ensure a good proposal, hire a short sale Realtor.