Home Loans California & Arizona

Short sale versus foreclosure

October 17th, 2012 3:35 PM by Nathan Rufty

The question that you should be asking yourself is whether to choose a short sale or foreclosure?

This question often arises from people who are finding it hard to keep up with their mortgage payments. In most cases, the mortgage is worth more than the home. Therefore, the crossroad comes in whether to enlist the home for short sale or let it go to foreclosure.

 One thing that you have to understand in this kind of situation is that the decision on which ones to prefer depends on variety of factors.  Throwing your hands and letting it go might not actually be a good idea.

Benefits of short sale

·         You control the sale process and not the bank

·         It is easy to sleep at night knowing the person who is buying the home.

·         It spares you social stigma of the foreclosure.

·         It is possible to be current on mortgage payments and still effect short sale.

·         The home sale is handled just like any other.

 Opportunity to buy a home again after short sale

If the mortgage payments has not fallen behind 30 days late and it is not a requirement by the lender you pay back your loan.  From Fannie Mae guidelines, you can buy another home.  However, finding a lender capable of funding the home loan will be a big task.  If you have been current on the mortgage payment, then you qualify for FHA loan. However, the requirements of the lender can at times be weird like having to move 600 miles from the home.

On the other hand, if you have arrears in payments and still grated a short sale by the lender, you can qualify to purchase another home with Fannie Mae mortgage in 2 years whether the home was a primary residence. FHA will take 3 years.

Buying a home after foreclosure

Although with restrictions, you will still be able to buy another home.  This is after 5 years is the home was a primary residence. If you prefer without restrictions you can wait 7 years to do so.  On the other hand, if you are an investor and certainly not occupying the home, you can wait 7 years with Fannie Mae insured loan.

Effects on credit after short sale

Short sale is considered derogatory mark on the credit even though it is not shown as short sale. The bottom line is that it will affect your credit in one way of another, as there are many ways to do that.

Effects on credit after foreclosure

 Depending on the credit history and some other guidelines, your credit score can fall from 105 to 150 points after the foreclosure.  The foreclosure will be in the credit report for 7 years.

Credit report after foreclosure

 If a credit check is run on you by the employer, it could cost you is the job application as the foreclosure depicts a very bad image.

Credit reports after short sale

Lenders generally report the short sales differently. Some report it as paid in full for less than sum agreed or charge off. The negative credit will also stay in the credit report for a period of 7 years.
Posted in:General
Posted by Nathan Rufty on October 17th, 2012 3:35 PM

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