One of the most often asked questions by home sellers is how a foreclosure or a short sale will affect his/her credit.  The first answer is neither help your credit score go up, it’s about which will have the least impact on you.  The next part to that question as you can surely understand is that your credit score will go down. The question is how much with a short sale vs. a full foreclosure?  No one person may have that exact answer, but as a general rule you should be affected more by 5 months behind on a mortgage over only 30 days late on a mortgage.  Typically a short sale speeds up the process, or ends the process for you sooner.  Which means that you’ll get on with credit recovery sooner than later as you are shortening the entire foreclosure timeline.

This article will be covering the main thing that is different from a foreclosure vs. a short sale as it relates to your credit report, credit history and future credit and house buying decisions.   I’ve attached a handout for you to open for the official release regarding Fannie Mae and Freddie Mac and how they will see, you as the buyer, in the future when determining to approve, or not approve you in the future loan process.  Fannie Mae and Freddie Mac purchase the majority of all conforming loans in the U.S.A. right now from all major lenders.

Please see the handout here:

http://foreclosurenightmare.com/underwriting-guidelines.pdf

Let’s review some key components from this handout:

Let me take a quote from the article:

“A preforeclosure sale involves the sale of the property by the borrower to a third party for less than the amount owed to satisfy the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer.  Due to the increased incidence of preforeclosure sales, Fannie Mae is establishing a 2-year elapsed time period for reestablishing credit following completion of the action.”

You can see if you give your house back to the bank and have a full foreclosure on your record, without it being special circumstances under their definition, that you could be looking at up to 7 years with this foreclosure on your record as well as up to 7 years before you can get financing on your next property.   You can see they also talk about 680+ minimum credit score and 10 percent minimum down payment.   There are many other limiting factors placed on the future buyer.

You can also see that in the situation of a voluntary foreclosure (Deed-in-Lieu of foreclosure) where you are deeding your property back to the bank, the restrictions are a little less harsh, but still pretty strict with a 4-7 year time frame, with many of the stipulations about as strict as the foreclosure option above.

Let’s review the short sale requirements:  Fannie Mae has given a 2-year time period from the completion date.  This means you could finance a home in as little as 2 years considering you get your credit score up and stay current on bills, have a steady job, etc.  This states no additional requirements.  This is one of the main benefits to doing a short sale, that’s why you should call us to get started on the process right away, it’s in your credit and financial best interest.

As you can see a foreclosure given back to the bank, and or a deed-in-lieu is one of the worst things you can do for yourself, your future, and your credit, a short sale is one of your best options given your situation.

We can also put you in touch with a credit recovery specialist during the process of the short sale to get your financial credit status cleaned up as quickly as possible.   The unique method of how we do short sales also benefits you in additional ways to get your mortgages paid off with satisfaction with a high liklihood of avoiding a deficiency judgment later on which is where the other non foreclosing lender, typically the 2nd mortgage lender may pursue you to get their monies owed.  This is an additional way we can help you, but not every agent or company will know how to do this, we specialize in it, please call us by phone to learn more.

www.ForeclosureNightmare.com

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