Foreclosure vs. Short Sale

Credit Score

Short Sale
A foreclosure will show up as a public record on your credit report, the same as a bankruptcy will show. The impact of a foreclosure can be anywhere from 200 to over 300 points. The foreclosure with typically will affect score for a minimum of 3 years and will report for 7 to 10 years.

Foreclosure
With a short sale, only late payments on mortgage will show on your credit report. Once the short sale is completed, it will be reported as “settled for less than full amount due” (or similar verbiage). Depending on the number of other trade lines you have, balances on credit card accounts and if everything else is kept current, the impact can be as little as 50 points. A short sale’s affect can be a brief as 12 to 18 months.

Credit History

Short Sale
Along with the late payments, the foreclosure will remain as a public record your credit history for 7 to 10 years.

Foreclosure
Only the late payments will be reported on your credit. The short sale will appear the same as a charge off on a credit card and will be reported as “settled for less than full amount due” (or similar verbiage).

Future Home Purchase (Primary Residence – Fannie Mae Loan)(effective May 21, 2008)

Short Sale
Any individual that looses their property to foreclosure will not be eligible for a Fannie Mae backed mortgage for a period of 5 years.

Foreclosure
Any individual that successfully completes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

Future Home Purchase (Non Primary Residence – Fannie Mae Loan) (effective May 21, 2008)

Short Sale
Any investor that looses their property to foreclosure will not be eligible for a Fannie Mae backed mortgage for a period of 7 years.

Foreclosure
Any investor that successfully completes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

Future Loan with any Mortgage Company

Short Sale
On any future loan application that is completed, the prospective borrower will need to answer YES to question C in Section VIII of the standard 1003 that asks “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” this may affect future rates after the 5-7 waiting period.

Foreclosure
There currently are not any questions related to a short sale on the loan application.

Deficiency Rights

Short Sale
In California, many loans give the lender the right to pursue the

Foreclosure
During the short sale negotiations, in most cases we are able to have the lender agree in writing to