If you’re struggling to pay your mortgage in New Jersey, you might be considering either a short sale or a foreclosure. While both involve selling your home for less than what you owe, they are different in how they work and what they mean for you as a homeowner. Let’s break down the key differences between a short sale and foreclosure.
What is a short sale?
A short sale happens when you sell your home for less than what you owe on the mortgage, but you need the lender’s approval to do so. In this situation, the lender agrees to forgive the remaining amount you owe on the loan. For homeowners in New Jersey, a short sale can be a way to avoid foreclosure and may have less impact on your credit. However, you must show the lender that you are facing financial difficulty, and they need to agree to the sale.
What is foreclosure?
A foreclosure is when the lender takes back your home because you haven’t been able to make your mortgage payments. In New Jersey, foreclosures go through the court system, which means it can take a longer time to complete. Once the foreclosure is finished, the lender can sell the home to recover the money you still owe. Foreclosures can severely hurt your credit score and may result in the home being sold at a public auction.
Legal process in New Jersey
New Jersey follows a judicial foreclosure process, which means the lender has to file a lawsuit in court to start the foreclosure. This adds time to the process, but it also gives homeowners a chance to fight back in court. On the other hand, a short sale doesn’t involve a court process. It’s a negotiation directly with the lender, which can be less stressful than foreclosure.
Which option is better?
It depends on your circumstances. For most homeowners in New Jersey, a short sale is a better choice because it gives you more control and can have less damage to your credit score compared to a foreclosure. A short sale lets you sell the home while avoiding the serious consequences of foreclosure, but you still need the lender’s approval.