A Short Sale is when the mortgage lender agrees to settle with a discounted payoff that is less than the balance owed on the loan to consummate a sale of the property and stop foreclosure. By taking this avenue, it will help the lender receive more of the loan balance and less hefty fees compared to a foreclosure process. The homeowner will also maintain a better level of credit. Certain criteria must be met to qualify for a short sale. Provision of economic hardship & evidence of zero equity in the property must be submitted by the homeowner to the mortgage lender. It is an extremely complex transaction, so be sure to select an experienced professional who is very knowledgeable in this field.
1. Credit Score
A short sale lowers your credit as little as 50 points for 12 to 18 months. While Foreclosure lowers it at a minimum of 250 points for three years or longer. Without the ability to repair your credit after a foreclosure, it may affect your ability to be gainfully employed or find housing.
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2. Credit History
A short sale is reported paid in full and does not show on a credit report. A foreclosure will be on your credit history for 10 years or more as public records.
3. Waiting period to buy another home
If you can stop your foreclosure, you can get loans with reasonable interest rates within two years. With a foreclosure, you may wait 24-72 months.
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