Should you prefer a short sale to a foreclosure when you can’t make payments?

September 6, 2011 0 Comments

Taking out a mortgage loan is itself a huge responsibility as you have to repay the loan on time in order to avoid the risks of a forced foreclosure. Though there are thousands of ways in which you can avoid a foreclosure and retain your home ownership rights, most home owners fail to follow them. Using a mortgage calculator is the best way to forestall losing your house to a foreclosure as you can already get clear ideas about your mortgage payments by utilising this financial tool. You can either go for a short sale or a foreclosure when you can’t make the monthly mortgage payments but before knowing which option is better for you, give a glance at the various mortgage calculators that can use to avoid such unfortunate situations.

Types of mortgage calculators that can help you forestall a foreclosure

Before you take out a mortgage loan, if you make some calculations by using the mortgage calculators, you can prevent losing your home to a forced foreclosure. Check out the types:

1. Mortgage affordability calculator: Calculating your affordability and the loan amount that you may qualify for with your present monthly income will keep you protected against making late payments or struggling with the monthly payments.

2. Monthly payment calculator: You can also use the monthly payment calculator to determine the monthly payments that you need to make on the loan amount that you’ve taken out. This will help you manage your finances better and repay the loan on time.

3. Loan amortisation calculator: The loan amortisation calculator will help you determine the total time period within which you can repay the entire loan and own your house. You can see the exact time you may take to become debt free and you can also make future plans.

Is a short sale better than a foreclosure?

If you’re someone who has not used a mortgage calculator and has landed up in a mess, you must be oscillating between whether to choose short sale or a foreclosure to get rid of your secured liabilities. Well, choosing any option depends on a several factors. Though it’s easier to surrender and let the banks take away your home, this may always not be a good option. Read on to know some things that you must consider.

Buying a home again after a short sale and a foreclosure – What are your options?

If you’ve not fallen back on your monthly payments by more than 30 days and the lender does not need you to repay the loan, according to Fannie Mae, you’re allowed to buy a home immediately post short-sale. However, finding a lender who will lend you such a loan is pretty difficult but if you were current on the mortgage, you may even qualify for an FHA loan.
On the other hand, if you choose to foreclose your house, you can be able to get a new one after 5 years, under certain restrictions. Without the restrictions, you may have to wait up to 7 years to get a new mortgage loan.

How does short sale and foreclosure affect your credit score?

While a short sale is considered to be derogatory on your credit report, the lenders report as “paid in full for less than agreed” and this drops your credit score by 50-130 points, a foreclosure may make your credit score fall by 105-160 points. This negative mark after a foreclosure may stay on your credit report for the next seven years, thereby barring you from getting loans with reasonable interest rates.

A short sale is thus a more popular option when it comes to home owners who are mired by financial issues. Do everything that you can do to avoid foreclosure as this may put the rest of your life at stake. Don’t forget to utilise the mortgage calculator so that you take the best mortgage loan in accordance with your budget and affordability.

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