What’s The Difference Between A Short Sale And A Foreclosure?

What’s The Difference Between A Short Sale And A Foreclosure?

What’s The Difference Between A Short Sale And A Foreclosure?

Tracy Brown

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Below are a few comparisons between short sales and foreclosures for a better understanding of why short sales are a better option for most homeowners. While a short sale is a complicated process, the outcome is worth it in the end!

What are the implications to my credit score?
Following a successful short sale, your mortgage will be reported on your credit score as either paid or negotiated, lowering your score as little as 50 points and affecting you for only 12 to 18 months. After a foreclosure, however, your credit score can lower as much as 300 points and usually at a minimum of 250 points and affects your score for over three years.

What are the implications to my credit history?
A short sale is usually reported as paid in full and is not reported on your credit history. A foreclosure will remain on your credit history for 10 years or more and will remain as public record.

Who decides if my home should undergo a foreclosure or a short sale?
With both short sales and foreclosures, the decision is made by your mortgage lender. The most important aspects to getting a lender to agree to a short sale, and saving you the more damaging credit implications of a foreclosure, are to prove that you have no other way to pay the mortgage and that the amount received from a short sale is the fair price of the market. Lenders who believe they can receive more by taking possession of the home in a foreclosure and selling it themselves will not agree to a short sale.

How long will I have to wait to buy another home?
After a foreclosure, you may end up waiting another 24 to 72 months before a mortgage lender will offer you an interest rate that is acceptable. Most mortgage lenders report that for homeowners who have undergone a previous short sale they may get a reasonable interest rate in less than two years. Fannie Mae guidelines allow a short seller to apply for a new loan immediately if payments were kept current and had no 60-day late payments on their record.

For more information on the difference between a short sale and foreclosure, download my free eBook here.

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