Credit Consequences Between Short Sales & Foreclosures
Written by Denae Frampton on December 8, 2008 – 8:02 am -Scenario
Many clients that I speak with have the idea that letting their home go into foreclosure is “easier” and less trouble than doing a short sale. The have “let the bank have it” attitude and think by doing so will get them on the road to recovery just that much quicker.
Reality
If you have a desire to purchase another home anytime in the near future we had better look seriously whether it is beneficial to “let the bank have it”. When someone goes through a short sale their credit score can be affected anywhere from 100-200 points, more if other payments have been missed as well. This reduction will show up as some sort of payments in full, settled payment, negotiated payment, etc. As you notice I did NOT say anything about your credit report saying FORECLOSURE. This is amajor difference right now with the most recent changes in the lending industry guidelines.
Purchasing a Home Again
Under the new Fannie Mae guidelines the effect of a Foreclosure on a borrowers’ credit worthiness is substantial, devastating and decisive. The effect of a short sale can be as little as 12 – 18 months depending on the homeowner’s ability to keep all other credit issues to a minimum. However, effective May 31, 2008, according to the Fannie Mae guidelines, a homeowner who has filed a foreclosure will be “ineligible” for a period of five years. This is a very significant change and will affect many people looking to purchase a home in the future.
Bottom Line
The bottom line is if you find yourself faced with a decision of what to do with your home, please do not hesitate to contact me to determine if we are able to help you through a short sale instead of “letting the bank have it”. You do have options..!!
FREE RECORDED INFORMATION ABOUT SHORT SALES
1-800-818-4359 EXTENSION 9111
Rob Reinke, CDPE
763-242-6303
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