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An individual having to choose between a bankruptcy and a foreclosure often has to make a choice between the proverbial devil and the deep sea. It will pay off big time if you know the pros and cons of each. The ultimate objective of both is to get out of debt and get set on a path to new financial growth and credit repair. You should be aware of which path will enable you to achieve your objective with as much saving of time and money as possible – because you are going to need both when you set out to rebuild your finances from scratch.

Pros of foreclosure

• If at all this can be considered a pro – a foreclosure stays on your credit report as a negative mark for only seven years. Moreover, you can work to improve your credit score and qualify for a mortgage again in as few as four years.
• You are not bankrupt – the foreclosure may leave you with some assets and liquidity to start your rebuilding process afresh.
• In certain states like California, if you choose to move away from your home the lender cannot then contact you for further payments.

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A short sale is an option available to home-owners that have a foreclosure or bankruptcy staring them in the face. A short sale is basically a sale of property for an amount less than what the home owner owes the banker or mortgage company. Needless to say that the bank has to agree to the ideal of the short sale and the amount agreed. If a short sale occurs the borrower is forgiven the remaining amount of the loan.

Banks agree to a short sale when they can see that the borrower is in serious financial distress and that there is little chance of him repaying the remaining mortgage amount. They may do the math and figure out that the small loss with a short sale is probably better than bearing the expense of a foreclosure sale. Besides there is no guarantee that a foreclosure sale will actually materialize. Many foreclosure auctions end without a sale.
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REO stands for Real Estate Owned property. It essentially means that a bank or lender has foreclosed a property but is unable to sell it off in a foreclosure sale. So basically, an REO is repossessed property that the mortgage lender is unable to sell of in a foreclosure sale. There is no clear answer to which is a better buy – an REO or a foreclosure. It depends upon the situation and your own ability to profit from what you purchase. There are benefits and liabilities to both an REO and foreclosure before, during, and after the purchase.

It is important to approach an REO with an open mind – do not assume that there is something wrong with the property just because the bank could not find a buyer for it during the foreclosure sale. In fact, REOs are a safe way to purchase foreclosed property. You do not have to deal with tenants and there are no title issues. An REO is considered a risk-free real estate buying option particularly for the novice buyer.
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The past few months have been extremely uneasy for homeowners across the United States but even more so for homeowners in California. The state of California which has the fifth largest economy in the world has been arguably hit the worst in the current credit crisis.

Foreclosures amongst homeowners have become a common phenomenon and have led to banks freezing credit as much as possible.

With jobs on the line, no credit and a rising household budget, homeowners have increasingly started to default on their monthly mortgage payments. Unfortunately, most of these homeowners have the capacity to make a monthly payment, but just not necessarily the full amount of the monthly payment agreed with their mortgage lenders.
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Every time government officials successfully trick the people into voting to give government more power and continue its existence for another four years, special interest groups and power-hungry bureaucrats are given nearly free reign on plundering ordinary citizens.

With a housing crisis already underway, though, tricking homeowners into voting for a particular candidate for president is a high priority for both Barack Obama and John McCain, each of which has available on their websites an outline of a plan to solve the foreclosure mess.

The small number of people who actually wish to inform themselves of the issues before going to vote may wish to read the candidates’ proposals, only a sample of which will be detailed here. The issues will be examined for each candidate, with the Democratic nominee analyzed first.

From Obama’s website comes this about the subprime mortgage industry:
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Everybody that own their own home needs to spend some think considering the risks associated with foreclosure and what they might do if they ever have to face the possibility of losing their home. Many people have had to work so hard to afford their dream home and once they’ve found the perfect house can’t wait to tell everybody about it.

The next thing you do is move into your beautiful new house and you are over the moon to be there. You will want to invite all of your friends and family over to visit so that you can proudly show it off to them. Every month like clockwork you keep on working as hard as you possibly can to make sure that you pay all your bills on time, especially the monthly mortgage payments for the house that you are so happy to be living in.

Now just imagine if a few years down the line when you have got used to the luxury of living in that dream home that out of nowhere disaster strikes and you find yourself out of a job. That job has been giving you the income you need to maintain your lifestyle and make it possible for you to pay all your bills on time, especially the mortgage bills for your house. Can you imagine how frightening that would be? Suddenly you start getting late notices dropping through the door and there is absolutely nothing you can do about it. You try to find another job but aren’t finding it that easy. All you seem to be getting is more bad luck after bad luck. (read more…)

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