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| Which is better, a short sale or foreclosure? |
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Last Updated
20th of June, 2009
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There are two reasons why you should try to market your home for a short sale versus just walking away, in which case the lender would foreclose on the property.
- There’s more to it than just the score – Yes, a short sale and a foreclosure have the same negative impact to your credit score, and your credit score is extremely important. We all know that. However, in the mortgage environment there is still a bit of latitude that your lender can use if he/she believes that you deserve a mortgage the next time you apply. In these cases, being able to show that you made the effort to satisfy some, if not the majority, of your previous mortgage can’t hurt, and it may be the difference between getting an approval or a denial the next time you want to buy a home.
- It’s the right thing to do – At the end of the day, we are all liable for our own debts since we’re the ones who signed on the dotted line. And whether we’re in a bad mortgage loan because of a rogue mortgage broker, or just because of plain old bad decision-making, we have to bear some, if not all, of the responsibility. If making good on the loan in full is impossible, making good on as much of it as possible is the next best and ethical action we can take.
While both short selling and foreclosing will negatively impact your credit scores in very similar ways, it’s better to attempt sell your home rather than just walk away from it. You may not save your credit scores, but in this way you will be better positioned when it comes to getting a mortgage the next time around.
Also, if you’re having trouble paying your mortgage because you are in debt, you can talk to a debt expert and get free debt consolidation. Another good option is Mortgage Loan Modification.
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