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Foreclosure Basics: The After Effects of a Short Sale
With more and more homeowners facing foreclosure nationwide, the short sale transaction is increasingly becoming popular for those who can not refinance their existing mortgages and are having a hard time looking for a buyer who will agree to their asking price.
Although a short sale will allow a distressed homeowner to avoid foreclosure, there is still considerable damage on the credit. In order for you to determine if you can live with them, here are the things you should expect from a short sale.
Credit Score
For many experts, the losses you will incur in terms of credit points from a short sale transaction are almost the same as an actual foreclosure. You can actually lose as much as 300 points. This means that if you have a FICO score of 700, you will be left with just 400. In the United States, it is very important for you to have a high credit score as it is a testament to your paying credibility. Those with high credit scores usually enjoy lower interest rate when they take out a loan.
Credibility
When you choose a short sale transaction, it will come up in your credit report as “pre-foreclosure in redemption status”. Although it sounds better than a “foreclosure” entry, you will still have to live with the fact that it is still a negative entry that can damage your financial reputation.
Waiting Period
This is perhaps the only advantage that a short sale has over a foreclosure. Instead of waiting for as long as 6 years - typical for a foreclosure victim - before you are qualified to buy a home at an acceptable interest rate, a short sale will only mean two years of waiting.
You must also remember that some short sale transactions will require you to settle the difference between the proceeds of the sale and the loan amount, depending on the state you are living in. To be sure, check the short sale procedure being followed in your area.
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on September 28th, 2008 at 9:00 pm
There is a lot of misinformation in the marketing regarding the Short Sale Solution. With the knowledge and a three pronged strategy that addresses credit, the short sale, and mitigation of the deficiency, it is the best solution for the distressed homeowner. Our program,”The Negotiated Solution” guides the homeowner with a Day 1 and Life After the Short Sale strategy so they can mend their credit and navigate their way back to a new mortgage in as little as 12-24 months. The key for all affected to win is not to simply focus on getting out from under the burden of the property and don’t be so hung up on just credit. Invest time in a plan the addresses all the items listed about and you will be a big winner. George