Tuesday, February 5, 2008

How will a Short Sale affect my credit?

I've been asked this a lot recently, so I thought I'd post my answer here.

For those unfamiliar with the term, Short Sale refers to a home being sold where the payoff on the Seller's mortgage is greater than the current sales price &/or market value of the home. The bank then agrees to take a short, or incomplete, payoff in exchange for moving the property off its books and avoiding the foreclosure process.


The bad news is: Short Sales and Foreclosures are both going to have a negative impact on your credit report. But, if you can negotiate a Short Sale successfully, you can minimize that negative impact significantly. Here's what Elizabeth Weintraub has to say on About.com:

A Short Sale will reduce your credit score by 80-100 points, and it will take you about 18 months before you're able to qualify for another mortgage at "reasonable" rates.

A Foreclosure will reduce your credit score by 250-280 points, and will require about 36 months before a mortgage at "reasonable" rates is accessible.

Your thinking a 100-point drop is better than a 280-point drop Realtor,

Chris Butterworth

[tags] short sale, foreclosure, credit report, fico score, Fletcher Heights [/tags]