What does a short sale do for me?
What are the implications to my credit score?
Following a successful short sale your mortgage will be reported on your credit score as wither paid or negotiated, lowering your score as little as 50 points and affecting you for only 12-18 months. After a foreclosure the picture is much bleaker with your credit score being lowered up to 300 points and usually at a minimum 250 points and affects your score for over three years.
What are the implications to my credit history?
A short sale is usually reported as paid in full and is not reported on your credit history. A foreclosure on the other hand will remain on your credit history for 10 years or more and will remain as public record.
Who decides if my home should undergo a foreclosure or a short sale?
In both short sales and foreclosures, the decision is made by your mortgage lender. The most important aspects to getting a lender to agree to a short sale, and saving you the more damaging credit implications of a foreclosure, is to prove that you have no other way to pay the mortgage and that the amount received from a short sale is the fair price of the market. Lenders who believe they can receive more by taking possession of the home in a foreclosure and selling it themselves will not agree to a short sale in almost every instance.
How long will I have to wait to buy another home?
After a foreclosure, you may end up waiting another 2-5 years before a mortgage lender will consider offering you an interest rate that is acceptable. Most mortgage lenders report that for homeowners who have undergone a previous short sale they may get a reasonable interest rate in less that two years. Fannie Mae guidelines allow a short seller to apply for a new loan immediately if payments were kept current and had no 60-day late payments on their record. This is great news for those facing possible foreclosure in Tennessee and North Georgia.
What will be the effects on my future loans?
For most mortgage lenders you will not be asked to declare or be questioned regarding a short sale on any standard loan application (1003). In regards to foreclosure, you will be asked on any future standard loan application (1003) if you have had a property foreclosed in the last seven years, therefore affecting your rate. Fannie Mae backed mortgages will be available to you folloing a short sale in two years. Fannie Mae backed mortgages (like FHA loans) will not be available to you for at least five years if you lost your home due to a foreclosure.
Does it effect my employment opportunities?
A short sale does not appear on a credit report and will not challenge your current employment status. In comparison, if you have a foreclosure on your credit report, some employers consider it a reason to terminate or reassign you since many run credit checks on employees for certain positions. A foreclosure can be extremely harmful to your chance of being selected for a new job if your credit report is taken into consideration especially if you need a security clearance.
How does a short sale versus a foreclosure affect the deficiency judgment?
If your short sale is handled successfully, the lender may give up the right to pursue a deficiency judgment against you. If the lender does pursue a deficiency judgment against you after a successful short sale, the amount will be considerably lower because your home was sold at a price closer to market value than that of an REO (Real Estate-Owned) sale. In all foreclosures, with the exception of those states without deficiency (Tennessee and Georgia allow them), the bank has the right to file a deficiency judgment against you. Since your foreclosed home will have to go through the REO process if not sold at auction for a lower sales price, this results in a higher deficiency against you and much higher in most cases.
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