Short sales or foreclosures...what's better?
Life can be tough especially when it comes to finances. Uncertainty can affect the most creditworthy person. You lose your job, terminal illness, divorce, the list can go on and on. It happens to a lot of people. Nobody wants to default on their home loan on purpose and lenders understand that. They know there must be a reason you’re struggling, and most want to help. There is help!
What are your options?
Refinancing & Modifications
Refinancing aka Refi
If you have enough equity in your property and a qualifying credit score, this could be a possible solution. Basically, you’re getting a new loan with a lower interest rate if available and a longer term that will lower your monthly payment and the risk of default or foreclosure.
Loan Modification aka Loan Mod
A Loan Mod is a permanent change in one or more of the terms of a borrower’s loan. It basically a brand spanking new loan that fits your financial needs.
Loan terms that may be changed
- Reduce the interest rate
- Change from an adjustable rate to a fixed rate
- Reduce the principal amount
- Reduce or waive late fees or other penalties
- Lengthen the loan term
Lenders use specific financial analysis criteria when determining which modification to offer you. Basically, they want to give you a loan you can afford and start fresh.
If you want to modify, there are several things you have to do and one of them is writing a hardship letter and show proof that you have fallen in hardship and need the help. This could be like you lost your job, got ill, disabled, etc. A true hardship, and no, racking up credit card bills on clothes does not count as a hardship…unfortunately.
Loan modifications are FREE!!! Don’t ever pay anybody, not even a REALTOR like myself. I assisted in helping many people modify their loans for free and a lot of them had come to us with horror stories paying thousands of dollars to another agent that “guaranteed” them the win. You can’t guarantee anything.
If you are struggling or know someone who is, my partner and I can help FREE OF CHARGE! No really, we don’t charge a single penny. It comes out of the kindness of our heart. One client of ours donated fruit to us, another gifted us a new water cooler. We were grateful because we aren’t doing it for money, but to help people keep their homes.
Anyway, let’s get back on track here.
Short Sale
So, if a refi or loan mod doesn’t work you should SHORT SALE! It is much better to a short sale than to let your home go into foreclosure. Also, better on your credit than a foreclosure. Especially if your house has equity you can pay off the lender and still possibly make some money. Either way, a short sale is a better option.
Foreclosure
Most of the time it cost the lender WAY more money to foreclose on a home than to have your short sale it. A foreclosure on your credit looks so bad. The next time you want a home loan, it’s going to wave giant red flags. They see it as you didn’t care or even try. The lender could work a deal with you by lowering the monthly payments until you short sale your home.
So, as you may already know, Short selling your home is better than a foreclosure but if you can save your home and refinance or do a loan modification, why not? It doesn’t hurt to try and like I said a million times, it doesn’t cost a thing! Let me and my partner help you.
As always thank you for reading, I appreciate you and your time.
xx
