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Explaining Foreclosures and Short Sales
A foreclosure will occur when a homeowner defaults on a mortgage for some reason. However, the main reason a homeowner will default on their mortgage is because they have experienced some financial problems. A foreclosure can be one of the most stressful situations a homeowner can go through.The process of financial decline can begin with making a payment late and then completely missing a payment.If there is little money in the house during a month, then it is very difficult to catch up with any late payments.If the situation is not rectified than the situation would continue during the following months.
No one wants to lose their home.Foreclosure is completely involuntary.A foreclosure can easily sneak up on a homeowner.Even though foreclosure is indeed involuntary, sometimes a homeowner has made some poor choices when it comes to their finances.There are some instances when a potential homeowner will borrow a lot more money than they can afford.There is also the situation where the homeowner has overspent their budget on expenses that were not related to the mortgage such as car repairs or an excessive use of money in some capacity.
However, the main reason that people lose their homes to foreclosure is that someone has lost their job or cannot work because of failing health.Most recently foreclosures have been caused by the ballooning mortgage payments that are associated with adjustable mortgages.
Having a foreclosure put on your credit report is an obvious problem but a foreclosure can also hurt family relations in a way that will be irreparable.It is not unusual for people to have short tempers when bills go unpaid and bill collectors start harassing you on the phone.A foreclosure can stay on your credit report for ten years and your Fico score can be brought down to two hundred or three hundred points.Two large mortgage financing companies, Freddie Mac and Fannie May have sent out new guidelines to lenders and banks that relate to foreclosures and walkaways.Fannie May will no longer allow borrowers that have had a foreclosure to get another mortgage through them for five years unless they can document hardship or extenuating circumstances.
A short sale is when one sells their home for a price that is a lot lower than what is actually owned on the property.For a short sale a home owner needs to negotiate the deal with the lender.Most of the time a homeowner will opt for a Short Sale to stop their home from going into foreclosure.
The difference between a short sale and a foreclosure is that a short sale is voluntary while a foreclosure is involuntary.When a homeowner chooses a short sale they want to move out of the home into a rental or another home.When a foreclosure occurs, the home owner is locked out of the home.
When faced with a foreclosure a homeowner can opt for a loan modification in order to keep their homes. It is possible to negotiate with your lender or bank to get your adjustable rate mortgage converted to a fixed rate loan.
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