A mortgage is a way to use one's real property, like land, a house, or a building, as a guarantee for a loan to get money. Many people do this to buy the home they use for mortgage: the loan provides them the money to buy the house and the loan is guaranteed by the house.

In a mortgage, there is a debtor and a creditor. The debtor is the owner of the property, while the creditor is the owner of the loan. When the mortgage transaction is made, the debtor gets the money with the loan, and promises to pay the loan. The creditor will receive money back with interest over time (usually in payments made each month by the debtor). If the debtor does not pay the loan, the creditor may take the mortgaged property in place of the loan. This is called foreclosure.

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor.

Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

Foreclosure is the legal process whereby a lender (bank or secured creditor) terminates the owner’s right to a property that was pledged as security for a debt.

The lender usually then forces a sale of parcel of the real estate or home, often at a public action, to satisfy the debt after the owner defaulted to comply with the agreement between the borrower and the lender.