The Basics of Foreclosure and Short Sale

A homeowner who could not fulfill his responsibility of paying his monthly mortgage has two options: foreclosure and short sale.

• Foreclosure – is a tedious legal process which involves banks repossessing your property because you defaulted on your monthly mortgage payments. The mortgage lender will file a notice against the delinquent homeowner 45 days after he missed his payment. This signals the start of the foreclosure process which will culminate 4 months after the filing.

  It is advisable to avoid foreclosure because it has lasting effects on the homeowner. The credit score of the owner of distressed property typically declined to as much as 300 points. Also, the mortgage lender can file for deficiency judgment against the homeowner since he signed a mortgage when he purchased the property and a promissory note.

• Short sale – is the procedure in which the mortgage lender accepts less payment when the homeowner sells his house, lower than what he owes on his mortgage. The mortgage lender would prefer not to close in on a property since the process is too expensive and they do not want to be saddled with vacant properties.

All struggling homeowners who want to avoid foreclosure are advised to contact immediately their mortgage lender. Sometimes keeping in touch with them will delay their filing for foreclosures which will give ample time to homeowners to short sale their properties.

As soon as the mortgage lender knows that a homeowner is interested in short selling, a coordinator or negotiator will be assigned to handle the process.

If a homeowner decided to short sale, his credit limit will decline but not as lower as that of foreclosures. The homeowner’s credit score can easily be repaired under a short sale deal.

With the current economic slowdown that seems to spare no one, some banks are willing to provide loan modifications in which the homeowner can stay in his home and the principal amount of loan reduced.

Find more Foreclosure Articles.

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