Foreclosure is a stressful situation to be faced with. You get answers from everyone claiming to be experts on the topic. I can not stress enough to be careful about whom you trust, even some real estate agents. It's as simple as that old saying "if it sounds to good to be true than it is". You have options when your being faced with foreclosure. First and most important is to talk to your lender. A couple of terms you should know about are,
Loan Modification - Lender modifies your mortgage to a payment that is reasonable for you to make each month
Repayment Plan - The lender takes the amount your behind divides that by 12 for 12 months and adds that on to your current payment. That will bring you current at the end of 12 months example your current mortgage payment each month in $1,000 and your behind in your payments by $9,000 your lender would take the $9,000 / 12= $750 that would than make your new monthly mortgage payment $1,750
Short Sale - Where the lender and investor agree to accept less than what is owed on the current mortgage. There is a program call HAFA (home affordable foreclosure assistance) where if the homeowner qualifies they can get up to $3,000 for relocation costs (moving expenses). A short sale is less of an impact on your credit than a foreclosure. A short sale tends to stay on your credit for 18-24 months. Allowing you to get a new mortgage quicker than if you had a foreclosure on your credit.
Foreclosure - Where the bank takes back the home and sells it as an REO (real estate owned) Can stay on your credit for 7 years making it harder to get a new mortgage down the road.
Common myths about short sales:
1) I need to be late on my mortgage payments to be considered for a short sale
NO you don't need to be late on your monthly mortgage payments to be considered for a short sale. As long as you have a hardship that is affecting your income you can do a short sale.
2) A short sale will damage my credit as much as a foreclosure
Short sale shows as a settled debt on your credit
3) I can not do a short sale if my property has gone to Sheriff's sale
Yes you can, you have 6 months after the Sheriff's sale to successfully close a short sale before it becomes an REO property.