I just received a call from a client who is having a hard time making his mortgage payments. He is current on his mortgage, yet, financially it has been hard for him to keep up with everything. What does he do and what should he consider?
First instinct is to get the property on the market. However, depending upon the neighborhood what's the real value of his property since the market is and continues to adjust? Does this send him into a short sale? Should he file for bankruptcy? Could he refinance? All good questions.
The refinancing has been pursued, structuring a workout or forbearance agreement are all off the list of possibilities. The question arises, "Should I sell my home as a short sale? I hear that saves my credit versus foreclosure." The ANSWER: A short sale is the next best option. As far as preservation of credit on a short sale vs a foreclosure: there is little.
So, the biggest advantage for the homeowner is the emotional advantage of closure but has little to do with the FICO score at the end of the day when it boils down to short sale or foreclosure.
Here's the benefits of doing a short sale:
1. Fannie Maie recently established a two year elapsed time frame for re-establishing credit for homeowners who sell their homes through a short sale.
2. If the homeowner goes into the foreclosure process, according to Fannie Mae Guidelines, effective June 25, 2008, a homeowner who has filed a foreclosure will be "ineligible" for a loan for five years.
Two years versus Five years? Two or Five? Doesn't take a rocket scientist to figure out the balance created in ones life in Two Years. Breathing.
Read the latest from Fannie Mae. Click here
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