Short Sale or Foreclosure?

Many people on the brink of foreclosure have been asking the question, “is it better to let the bank foreclose on my home, or should we try to get a short sale instead?”

There is no hard and fast answer to this question, but here’s the basic difference:

On a short sale, basically you sell the house for less than what the mortgage is worth and the lender forgives the difference.

The problem is that your FICO score will drop about as much as it would with a foreclosure.

But that doesn’t mean you can’t ever take out another mortgage. In fact, you may be eligible to buy a home with a loan backed by Fannie Mae or Freddie Mac more quickly with a short sale than you would if your home went into foreclosure. Lenders generally try to encourage short sales instead of foreclosures since they cost less for everyone involved.

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