Foreclosure vs Short Sale


 Effect On Credit Score and Credit History

  • After a successful short sale, your mortgage will be reported as paid or negotiated, lowering your score by  as little as 50 points and affecting you for only 12 to 18 months. After a foreclosure, your credit score can lower as much as 300 points and will be affected for over three years.
  • A short sale can be reported as paid in full and and may or may not be reported on your credit history. A foreclosure can remain on your credit history for 10 years or more and will be public record. Since rules are subject to change, please check with a tax advisor or an attorney to verify the current state rules for these procedures.


How It Affects You

  • In both foreclosure and short sales, the decision to pursue can be made  by your mortgage lender. Your lender must be contacted to start the short sale process.
  • After foreclosure, you may have to wait sometime- even years before a mortgage lender will offer you an acceptable interest rate which will allow you to purchase another home. Previous Fannie Mae guidelines did allow in some cases for short sellers to apply for new loans immediately if the payments on the home were kept current and there were no 60-day late payments on their record.  Please keep in mind, many of the guidelines have changed. You must consult with your lender and a real estate agent can help you navigate this process with the lender.
  • Choosing foreclosure can have a negative affect on attempting to get future loans. You will be asked on any future standard loan application if you had a property foreclosed in the last seven years and it will affect your rate whereas in most cases, mortgage lenders do not ask that short sales be declared on any standard loan application. If you have lost your home due to a foreclosure, Fannie Mae backed mortgages will not be available to you for at least five years.

 

 Please contact me with any additional questions.