Ladera Ranch, CA- Homeowners who sacrifice to pay mortgages, trying to keep from going into foreclosure, used to have a better option. A short sale could be arranged. Short sales allow the homeowner to sell the home for less than the mortgage amount owed. Banks in the Ladera Ranch area have traditionally allowed such sales. The lender loses money but It was a good way to avoid foreclosure, which may cost them even more.
Lately, banks are agreeing less to allow those short sales. Market forces have driven that option down in many cases. Short sales were a win/win for both bank and homeowner but the number of allowed short sales is rapidly dropping.
Whether through foreclosure or a short sale of a home, the seller is in for a damaging credit blemish on their credit report. Mortgage holders lose money either way and the owner loses good credit. A foreclosure can drop a credit score by more than 100 points. Short sales are less damaging than foreclosure, but either are bad.
Since short sales are now less of an option, more foreclosures appear likely in the immediate future. In fact, RealtyTrac.com, shows foreclosure numbers continuing into record territory. That spells more homeowners ending up with bad credit.
There are credit repair companies that can help. But, the amounts they charge could be used to pay other bills. The less costly option is a do-it-yourself credit repair plan. Discipline is what is needed.
If a foreclosure is experienced, start immediately to ensure all bills are paid on time, every month. Avoid the credit repair service route and apply any extra money to slightly more than minimum payment for credit bills. Slowly, but surely, the credit score will begin rising again. Time and a determination to allow no bills to be late will show success and the blemish of a foreclosure or short sale will gradually become lessened.
Avoiding both foreclosures or short sales is the best option. No one wins. The banks lose, the homeowner loses and more product is on a glutted market which, in turn, drags the home market and the economy down even further. If neither can be avoided, begin as quickly as possible to overcome the bad credit consequences. Discipline, a strong will and a good plan will overcome the lost credit score and establish sound financial footing for the future.
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