1. You get some control of how long you stay in your home. You're actually selling your home, not getting kicked out.
2. Unlike foreclosure, a second lienholder won't come after you after the closing. In Washington State, the first lienholder will usually forgive the deficiency whether you foreclose or short sell, but if you have a second mortgage, a foreclosure won't get you off the hook.
3. Your credit takes less of a hit with a short sale, and you'll be able to qualify for a conventional mortgage in 2 years, as opposed to 7 years with a foreclosure. You may not care about that right now, but you will in a couple years when you're trying to get a credit card (or you see a short sale that you want to buy).
4. Bankruptcy can slow down, but won't stop a foreclosure. This is even more damaging to your credit than foreclosure. If you have relatively little debt other than your mortgage, think twice before filing.
5. Loan mods are great, but you'll still owe the same amount, just at a temporarily lower interest rate. If you're just treading water until the inevitable comes, think about what's going to happen 6 months from now.
6. When you sell short you typically don't pay any closing costs, HOA liens or back taxes. Each case is different so call me if you want to talk about your specific situation.
Here is a look at some of the common options available through most lenders (In order from best to worst in how damaged your credit could be):
1. Work out a loan modification with your lender. This is a permanent change to the terms of your mortgage to make it more affordable and you will be able to keep your home.
Don’t wait! Talk to your lender about your options right away. You might want to use this letter as a checklist when you call your lender so you can ask about which options are available to you. Most lenders don’t want to foreclose and will work with you to find a better alternative.Beware of scam artists: Do not pay any “counseling services” a fee to help you, nor sign over your deed to any “investor” who will claim to “assist” homeowners or “save” their homes and never make any payments to anyone but your lender. Only your lender can authorize any change to your existing mortgage agreement.
The situation you’re in now is temporary and you’re not the only one who’s gone through this. One day you’ll be over this and will have moved on. But first, you have to get through it—and that means doing what’s best for your future.
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