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Foreclosure VS Short Sale Homeowner Consequences Part 2
This is a 2 part post that covers facts regarding foreclosures and short sales and the consequences that come with it.
Short Sale
FUTURE LOANS
A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.
An investor who successfully negotiates and closes a short sale will be eligiblefor a Fannie Mae backed investment mortgage after only 2 years.
On any future loan application there is no question regarding a short sale. Hence, future rates will not be affected.
CREDIT
Only late payments on mortgage will show and after the short sale mortgage will be reported as paid or negotiated. A credit score may be lowered as little as 50 points. Typically, short sale will affect a credit score for 12 to 18 months.
Short sale is not reported on a public record on a person’s credit history. There is no specific reporting item for short sale. The loan is typically reported “paid in full, settled”.
EMPLOYMENT
A short sale is not reported on a credit report and is therefore not a challenge to employment.
If a person is a police officer, in the military, in the CIA, or any other position that requires a security clearance, a short sale on its own does not challenge most security clearances.
DEFICIENCY JUDGMENT
In successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner.
In a properly managed short sale the home is sold at a price that is close to market value and in almost all cases will be better than a REO sale resulting in a lower deficiency judgment, if any.
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