Chuck Lunsford asked:




Homeowners looking to stop foreclosure are faced with a number of options, one of which is doing a short sale. Some people, depending on their situation, may allow a property to go into foreclosure instead of attempting a short sale. One reason is they don’t want to keep the home in the first place. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. The primary consideration above all is the affect both can have on your credit score.

The Basics Of A Short Sale

The concept of a short sale is fairly simple. A short sale occurs when the sale proceeds of a house fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. A few words of warning are in order. Not every lender will negotiate a short sale. If for example your payments are current, yet you foresee imminent cash flow problems arising that will affect your ability to make your monthly mortgage payment. Lenders have no interest in negotiation unless your payments are several months late. Another consideration is you may be held liable for taxes on the difference between the sale amount and the original loan amount. Short sales require nerves of steel.

The Credit Affects

Foreclosure

Without a doubt sellers will incur more damage on their credit report by going through foreclosure. Typically your credit score will take plunge between 200 to 300 points.

Short Sale

Short sales have a far less damaging affect on a seller’s credit report. Credit scores typically lose between 80 to 100 points. What happens to your credit down the road? It is takes around three years after a foreclosure before a lender will offer a sensible interest rate, whereas for a person who went through a short sale typically waits around 18 months to buy another home at a good interest rate.

Salvaging your credit should always be the primary concern when making the decision between a short sale and stopping foreclosure. The savings in interest payments alone should be convincing enough for most people, not to mention your buying power in the near and distant future.

Tonya

Barry Dawn asked:




You are not alone. No, this does not refer to the Michael Jackson song, but to the fact that when speaking about mortgage – Thornhill or anywhere else in Canada – many people are availing of this option. Millions of people from around the world are getting a mortgage because that is perhaps the easiest way to purchase a home. Not everyone has access to hundreds of thousands of dollars at any given time that they can immediately buy a house whenever they feel like it. Thus, people resort to getting a mortgage.

The sad part is, you frequently read about people unable to make their monthly payments and suffering from enormous financial trouble. There are pieces of news talking about people losing their homes because they were not able to properly handle their mortgage payments. Exposure to these stimuli would not help you – especially if you have a current mortgage – Toronto or elsewhere.

The good news is, you have all the power in the world to prevent having to face mortgage management problems. You have the power within yourself to ensure that you don’t ever have to stress yourself about losing your home to your creditor. Here are some tips:

1. Keep all your records.

There are bills that you can throw away after a year or so. Among these are your electric bills, phone bills and even your credit card bills. But when it comes to your mortgage bills, don’t ever feed them to your trash bin. A mortgage is a long-term engagement, usually ranging between 20 and 30 years, and is something that involves a very large amount. Therefore, make it a point to keep all documents and records pertaining this. When refinancing options are calling on you, you would need all your mortgage records. This takes away the inconvenience of asking for copies of your bills from your lender – a task that’s either stressful or uncomfortable.

2. Take advantage of refinancing.

Over the course of your mortgage, there will come a time when interest rates will be at their all-time lows. When this is the case, take advantage of it. Make sure that you are aware of the movement of the current market rates so you know when to move from one mortgage to another. By refinancing, you get to enjoy lower rates. Some people are not able to take advantage of this option out of either ignorance or sheer inertia – they don’t know that such an option is available and they simply don’t want to “work.”

But not all circumstances are perfect for refinancing. To make sure that your unique mortgage situation is ideal for refinancing, consult a financial expert.

3. Keep a healthy reserve of funds.

Especially when you are paying a mortgage, the need for you to have a healthy reserve of funds is more pronounced. This watches your back when you have a sudden loss of income or in case you will be faced with unexpected fees related to your mortgage. By having a healthy savings account, you are protecting yourself from having nothing to rely on when emergency mortgage funds are needed.

Kathleen

Leslie Collins asked:




If you fall into one of these categories you should definitely consider an FHA loan.

- Considering a home purchase with less than perfect credit
- Considering a home refinance with less than perfect credit
- Considering buying a home but have not established traditional credit.
- Currently in an ARM loan that is due to reset – and have less than perfect credit

If you have less than perfect credit or no traditional credit you may be in luck due to easy FHA loan qualifications.

Why?

FHA loan qualification guidelines are perhaps the most lenient in the mortgage world because they do not use FICO scores exclusively to assess your risk as a borrower.

Many With Low FICO Scores Qualify for FHA Loans

FHA makes it’s decision on whether or not to grant you a loan based on your total credit profile. For example, your credit score may have taken a dip because of some isolated events in the past, job lay-off, illness, divorce etc…Fortunately FHA lenders look at your bill paying history over the last 2 years to determine if you qualify or not, your low FICO score will not disqualify you from receiving an FHA loan.

FHA Looks at Overall Credit Profile

FHA’s philosophy is that the majority of borrowers overcome these financial setbacks. You are truly NOT the high risk your FICO score indicates; even though your credit score may indicate sub-prime status.

FHA will assess your income, recent payback status with current lenders as well your current debt-to-income ratio giving borrowers a chance to purchase or refinance a home.

Non Traditional Credit Qualifies

What if you have no established credit? You may have never used credit cards, had a car loan, student loan, or mortgage. These are considered traditional means of credit which are recorded with the 3 major credit bureaus.

FHA qualifications consider non traditional credit references as proof of responsible money management. Payments like rent, utility bills, cell phone, personal loans, and even regular deposits into a savings account as proof of “credit worthiness”

So if you thought that your bad credit or non credit disqualified you from purchasing a home – think again – an FHA loan may be the answer.

Dan