A "short sale" in real estate refers to a real estate transaction where the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts. This can happen when you owe more on your loan than the home is worth and you need to sell it. You can only do a short sale if your lender approves it because they must agree to make less money than they're owed. To qualify for a short sale, you must prove financial hardship with documentation.
A "foreclosure" is a property that has been taken over by the lending institution as a result of the mortgagor's failure to keep up on the mortgage payments. If you're in financial hardship situation and stop making your payments, a foreclosure will be the ultimate result. When you miss a payment it's called default. After a period of no payments, your lender will begin the foreclosure process. When this happens, the homeowner's rights to the property are forfeited. If the homeowner cannot pay off the outstanding debt or sell it via short sale, the home goes to a foreclosure auction. If the property does not sell at auction, it becomes the property of the lending institution.
In either situation, your credit score will be affected and it could be harder to secure a mortgage loan in the future. A short sale will cause your credit score to drop as little as 50 points if you don't incur any late mortgage payments during the short sale process, or as much as 200 points if you do incur late payments. Getting a new home loan after a short sale can happen in as little as 2 years if you can put down 20 percent. In a foreclosure, your credit score can drop 200 to 400 points. A foreclosure hits your credit harder than a short sale because you have to accrue late mortgage payments on your way to foreclosure. It can take up to 7 years to get a new home loan after a foreclosure, but it can be significantly shorter if your hardship was beyond your control, like a job loss.
If you're worried about being able to make your mortgage payments in the future, give me a call at 573-7467211 to talk about your options. There's a possibility we might be able to refinance your home at the Lake of the Ozarks to get your payments lower before you run into the issue of not being able to pay. When it comes to your financing needs, I'm committed to working with you every step of the way!
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Sr. Residential Mortgage Lender
NMLS #: 493712
2265 Bagnell Dam Blvd, Suite B
PO Box 1449
Lake Ozark, MO 65049
Cell: (573) 216-7258
**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.