I realize that depending on what you are listening to or reading that the Santa Maria real estate market is just booming, like every where in the country. I am don’t necessarily agree with that but then I do not have a talk show. The economy has improved, getting a home loan has gotten a bit easier and we are not in the same situation we were a few years ago, I do agree with that. I also realize that there are hardly any more foreclosures out there and hardly any one is doing a short sale anymore.
But there are still many homeowners that were able to avoid a foreclosure or cancelled the short sale that they were contemplating on doing because they did get a loan modification on their home loan. So now they are able to keep their home. But the thing is depending on the loan modification it really was just putting a band aid over a big wound. Not all loan modifications are created equal. For example some reduce your payment but then the difference of what you were paying is just added to the balance of the loan, not sure why you would agree to that, since you would almost never repay. Others allowed you reduction in payment for certain years only to revert back to the original payment. So some clients are realizing that the loan modifications, that they have may not be what they want.
So now that the debt forgiveness is over I get asked if it really matters whether to just let the house go or do a short sale. It is still in your best interest to do a short sale. In doing a short sale the bank or banks if you have two loans agree to accept what the house will sell for even if it is much less than what you owe. This keeps them from going after you for the difference. Especially if you have a second on your home, just because you let the home go to foreclosure does not mean that you are off the hook. They will and can haunt you for years to come.
Second reason would simply be, that if you ever want to be a home owner again or do another home loan. If you allow the home to go to foreclosure, you will not be able to get conventional financing for the next 7 years vs. 2 years if you just agree to do the short sale. FHA will allow you to do another home loan after 3 years, whether its a short sale or a foreclosure. But you will be limited to one loan and FHA has a pmi that is added to the loan that will cost you several hundred a month added on top of the loan for the life of the loan now with new changes.
Long story short if you want to start over again and save some serious money and heart aches, just do a short sale. I know many people have just said, screw it here are the keys and walked away but it will haunt you later. A short sale can be a long and frustrating process but in the long run its a much better alternative than a foreclosure.
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