The Difference Between a Short Sale and a Foreclosure

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WHAT IS THE DIFFERENCE BETWEEN A SHORT SALE AND A FORECLOSURE?

The following comparisons between a short sale and a foreclosure should provide an understanding of why a short sale is a better option for most homeowners. A short sale is a complicated process, but the outcome is well worth it. Those who undertake the short sale process must excercise patience and diligence.

Implications on your credit score
After a successful short sale
your mortgage will be reported on your credit score as either paid or settled. The impact of settling the account will probable be significant,but just how significant depends on your unique credit hisotry. After a foreclosure your credit score can be lower by as much as 300 points and usually at a minimum of 250 points, and affects your score for seven years.

Implications on your credit history
A short sale
is usually reported as "settled" which means that you reached an agreement to repay only a portion of the total amount. The remainder is written off as a loss by the creditor. Settled accounts, like all charged off accounts are negative. The term "short sale" does not actually appear in a credit report. A foreclosure in your credit report is typically looked at as very negative by lenders. It may not be as bad as a bankruptcy, but not paying your mortgage and losing your house to foreclosure is very close. The presence of a foreclosure on your credit report probably will make it difficut to get new credit at the best rates. A foreclosure remains on your credit report for seven years, so it will have a long-term effect on your creditworthiness. The negative information is deleted eventually so you can rebuild your creditworthiness.

Who decides if your home should be sold short or foreclosed?
Your mortgage lender will make the final decision about whether your house will be foreclosed, or whether a short sale will be allowed. The most important factor is whether or not you can prove that you have no other way to pay the mortgage, and that the price received is a fair a fair price gotten through open market efforts. If the lender thinks they can get more money in a foreclosure and selling it themselves will not agree to a short sale.

How long until you can buy another home?
After a foreclosure it would be at least 7 years before you could recieve a Fannie Mae mortgage to purchase your next home.

We help homeowners use a Short Sale to avoid home foreclosure in Somerset County and Middlesex County New Jersey real estate market.

This site is sponsored by "Cameron and Zoraida" at http://www.CameronAndZoraida.com
Cameron Henderson and Zoraida Maldonado, Broker Associates
Weichert Realtors, 3530 Rt. 27, Kendall Park, NJ 08824
(732) 398-1493 Mobile (732) 297-0200 Office

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