A Loan Modification is Better Than a Short Sale for Many Reasons
A short sale is often considered by people as the right way out of avoiding a foreclosure
. This is where a person will sell one's home and get some kind of cash value that is lower than its market value for it. This may be useful but the truth is that a loan modification is a better option to use when it comes to avoiding a foreclosure. Here are a few reasons as to why this is so.
One important reason comes from how the impact on one's credit will be reduced when a loan modification is used instead of a short sale. Either option is better than dealing with a foreclosure when it comes to one's credit. However, a short sale will create a negative impact on one's credit because it will suggest that a person could not pay off a home. The impact is not as bad as it can be with a foreclosure and it will not stay on one's credit report for too long. It is still risky though.
A Loan Modification, on the other hand, will not create a negative impact on one's credit report. A loan modification might create a temporary reduction in one's credit but it will make it easier for a person to build credit. This is thanks to how one's credit payment history can improve thanks to the reduced monthly payments that can be involved in a modification.
Also, there is no need to move to a new home when a loan modification is used. This is important because it can be a challenge for a person to find a new place to move to in the event that a short sale has to work. A loan modification will be used to make one's current home more affordable. It will not force a person to sell it. This is great not only for people who want to avoid foreclosures but also those who want to stay in their current homes.
The biggest advantage by far is that a person who enters a loan modification can still work to sell one's home at a full value later on in time. A short sale will cause a person to get about two thirds of the value of one's home in a majority of cases. A traditional sale can work to get a person to earn something closer to one's actual home value. This can vary according to fees in the process that one uses though. This is important because by keeping one's home it will be easier to earn more off of it in the event that a person has to actually sell one's home down the road.
These advantages of a loan modification make this something that is better than that of a short sale. Either option is better than a foreclosure but a loan modification will not create a substantial impact on one's credit. It will not force a person to move to a new home either. It can even allow a person to earn more money off of a home if it has to be sold off later on.
A Loan Modification is Better Than a Short Sale for Many Reasons