Is a Short Sale Right for you?

If you've been unable to keep up with your mortgage payments, it might seem like your only option is foreclosure.  There is, however, another option.

You may be able to do a short sale on your home before foreclosure.  Here are the advantages & disadvantages to consider before doing a short sale.

What is a short sale?

A short sale is when a property is sold at a lower price than the amount the homeowner owes on the mortgage, & the mortgage lender agrees to the "short" payoff.  Banks & lenders have specific rules on which properties qualify fort a short sale.  If you decide on attempting a short sale in lieu of a foreclosure, call your lender.  You will need official approval, as the lender is agreeing to a discounted payoff.

Pros & Cons

The advantages of a short sale:

• Your loan will be considered paid in full.
• You'll avoid foreclosure.
• A short sale has a smaller impact on your credit.
• After a short sale, you may be able to buy another home sooner than you would with a foreclosure.

The disadvantages of a short sale:

• You take full responsibility for the sale of your home, which can be time-consuming.
• If you find a buyer quickly, you have have to move sooner than expected.
• All proceeds from the short sale go to the lender.

Impact on your credit

A foreclosure puts a serious black mark on your credit history that will last for seven years & hamper your ability to get loans & credit in the future.  There is also a time limit after a foreclosure in which you will not be allowed to buy another home.

A short sale doesn't have the same impact as a foreclosure, but your credit will still be damaged & you may struggle to find a lender that is willing to give you another mortgage soon after a short sale.

Getting help

If you're unsure whether a short sale is right for you, speak to a real estate attorney.  A real estate attorney can review your situation & help guide you to the best solution.  You can also peak to your lender.  Your lender has specialized loan officers who are able to review & guide consumers at risk of foreclosure.

Shared from:  Susan Wellish www.realtor.com

Not Only Did You Lose Your House—Your Credit Score Is a Mess After a Foreclosure

“Foreclosure” is a frightening word for a number of reasons. Topping the list? If you’re unable to make your mortgage payments, you’ll lose your home.

However, the misery doesn’t end there. Foreclosure ripples out and affects your credit score, which can hurt your chances of qualifying for a new loan—or another home—in the future.

Foreclosure and your credit score

A foreclosure appears on your credit report and leaves a dingy residue that can seriously damage your credit score.

“A mortgage is considered one of the safest forms of credit but is also typically one of the largest debts a person ever has, so when you stop making payments, or are late on a payment, you will see a large drop in your scores,” said Rod Griffin, director of public education for Experian.

While it’s impossible to pinpoint exactly how many points your credit score will plummet after a foreclosure, it might be enough to drop your score from the prime to subprime range. “A consumer could drop credit tiers following a foreclosure. [It depends] on the consumer’s credit history prior to the foreclosure and if there are other negative factors contributing to a drop at the time of foreclosure,” Griffin said.

And while some of the negatives will diminish over time, a foreclosure will linger on your credit report for seven years from the filing date.

Rebuilding

Getting your credit score back on track after a foreclosure boils down to following a simple philosophy: Keep it positive.

“Because negative information is deleted eventually, you can rebuild your creditworthiness if you take control of your debts and build a history of positive payments that will continue to appear after the foreclosure disappears,” said Griffin.

Applying for credit

Applying for credit after a foreclosure is tricky.

“A foreclosure in your credit report is typically looked at by lenders as very negative. It may not be as bad as bankruptcy, but not paying your mortgage and losing your house is very close,” Griffin said.

If you apply for credit cards, department store cards, or other loans, you may find lenders aren’t as willing to extend credit as they once were. And when you do get approved, you’ll likely face higher interest rates, higher annual fees, or more onerous terms than you would have before your foreclosure.

Buying a home

If you think you’re back on solid financial footing and want to buy again, jumping back into the home ownership saddle is near impossible shortly after a foreclosure. All mortgage loans have a waiting period after a foreclosure before you’re able to apply for another loan:

• Conventional loans require a seven-year waiting period.
• Loans backed by the Department of Veterans Affairs require a two-year waiting period.
• Loans backed by the Federal Housing Administration require a minimum of one year.

It’s tough to rebound from a foreclosure and become a home buyer again, but the devastating effect of defaulting on a loan has a more immediate (and negative) impact on your credit score.

Reposted from:  http://www.realtor.com/advice/foreclosure-makes-a-mess-of-your-credit-score/