What will the impact be on my credit score?
After a successful short sale your mortgage will be reported on your credit score as negotiated or paid which will only lower your score bay about 50 points and only affect you for 12 to 18 months. However, following a foreclosure, our credit score will probably be lowered by between 250 and 300 250 points and will affect your credit score for at least three years.
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What will the impact be on my credit history?
A short sale will usually be reported as fully paid and not reported on your credit history. A foreclosure will usually stay on your credit history for at least 10 years and will stay on your credit history as part of the public record.
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Who determines if my home should undergo a short sale or a foreclosure?
In both a foreclosure and a short sale this determination will be made by your mortgage lender. The most important aspect of getting a lender to agree to a short sale which will save you the impact of credit that is damaging credit, is to prove that there is no other way for you to pay the mortgage and that the amount that will receive from a short sale is the fair market price. The lenders who think that they will receive more money by taking possession of the home through a foreclosure and selling it themselves will usually not agree to a short sale.
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How long will it be before I can purchase another home?
Following a foreclosure, you may have to wait about 24 to 72 months prior to a mortgage lender offering you an acceptable interest rate. Many mortgage lenders have reported that for those homeowners that have undergone a short sale previously they may get an interest rate that is reasonable in less than two years. The Fannie Mae guidelines permit a short seller to apply for a new loan immediately if the payments were kept current and they had no payments that were 60 days late or more on their record.
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What will be the effects on future loans I may need?
Many mortgage lenders will not question you nor will you be asked to declare a short sale on any standard loan application. With a foreclosure, you will be asked on any standard loan application if you have had a property foreclosed on in the past seven years, which will obviously affect your rate. A mortgage that is backed by Fannie Mae will be available to you two years after a short sale. A mortgage that is backed by Fannie won't be available to you for at least five years if you have had a foreclosure.
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Is there any affect on employment opportunities?
A short sale won't appear on any credit report and therefore will not challenge your current employment status. However, a foreclosure on your credit report is considered by many employers as a reason for reassignment or even termination because most employers run credit checks on their employees. In addition, a foreclosure may be very harmful to your chances of being selected for a new job if the potential employer considers your credit report.
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How does a foreclosure vs. a short sale affect the judgment?
The mortgage lender can give up the right to pursue a judgment against you if your short sale is successfully handled. Even if the mortgage lender does pursue a judgment against you following a successful short sale, the amount will be considerably less since your home was sold at a price so close to market value. With every foreclosure, with the exception of those states that don't have deficiency, the bank has the right to file a deficiency judgment against you. Because your home that was foreclosed on will have to go through the full market process if it isn't sold at auction for a lesser price, this will usually result in a higher deficiency judgment against you.
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