For homeowners who fall behind on their mortgage payments, mainly due to a sudden financial crisis, such as unemployment and other income loss, unexpected debts, interest rate hikes, or economic downturn, among others — the two main options available are either a short sale or foreclosure. In both cases, the owner is forced to part with their hard-won investment, turning their homeownership dream into a nightmare. Let's take a closer look at what these things are, their differences, and which is the better option for any homeowner depending on their situation and timeline. A short sale occurs when the homeowner or property holder owes more on the mortgage balance than the sale price of the property at the point they want to sell. It happens when the home has substantially depreciated in market value since its purchase. A foreclosure, on the other hand, is a legal process that takes place when a homeowner (or borrower, in this matter) stops making mortgage loan payments for a significant period of time.