Taking out a loan is more common than you might think. Due to the economic crisis, many individuals have financial problems. It can be difficult to buy food and cover all the utility expenses, not to mention to make larger purchases. Buying a house or an apartment on your own, by using just the money you saved up is almost impossible.
In this economic situation, it is quite difficult to save up enough cash to be able to purchase a property. Only the lucky ones can achieve this goal. Others have an opportunity to contact a lender and try to take out a loan. Whether your request will be approved or not depends on various factors, such as your income, credit score, your employment status and more. If a bank accepts your loan request, you will be able to achieve the dream of becoming a homeowner.
However, you can never be sure what the future will bring. You could lose your job in an instant, without even expecting it to happen. Your income could also be reduced, which could put you in an unpleasant situation. If you are a parent, you will also maybe need to spend money on sending your kids to college. You have to face various expenses each month, and because of them, paying the loan back can be quite difficult.
If you can’t afford to pay the loan back anymore and fall behind on your mortgage payments, you have two options – to choose a short sale or to pick foreclosure. Most people want to avoid the second alternative, because of its negative consequences, so they opt for the first one.
Choosing a short sale over a foreclosure is also beneficial to lenders, as they don’t have to deal with all the paperwork that foreclosure includes, as well as they can avoid expenses of this process. A short sale is an agreement between the lender and the homeowner to sell the house short, or in other words, to sell it for less than the amount owed by the borrower. If you want to choose this option, you need to provide a proof of hardship, such as, for example, unemployment, loss of income, medical illness, or a divorce. If you want to know more about this process, you can talk to your lender, or contact a local realtor.
What are the benefits of a short sale?
The primary advantage is that your credit score won’t suffer as much as it would with the foreclosure. Having a bad credit rating can lead to problems in the future, for example, when you try to purchase another home. That’s why it is crucial to keep your score as high as possible.
Another benefit is that you will retain some dignity because you sold your house, instead of just lost it due to foreclosure. Also, you will be able to meet the new owners. This opportunity is especially beneficial to those who don’t want to sell their property to strangers, because of the emotional bond. Additionally, you will have more control over the entire process.
The last benefit is that you will be eligible to buy a new house in just two years, instead of five to seven years as with a foreclosure. If you are not more than 60 days late on any payment, you will even be able to purchase another home immediately. As you can see, choosing to short sell is quite beneficial in comparison to foreclosure.