Real Estate Short Sale: What Is It And How Does It Effect My Credit.
What is a short sale? After the real estate bubble burst. House prices rapidly dropped. Many homeowners ended up having a mortgage balance higher than the current market value (Term used for this “Under Water”). So these under water homeowners cant refinance or sell their home without coming up with a large sum of money to cover the difference. For many people foreclosure was the only option. Foreclosures are costly for the lender, take time, involve attorneys, and make homeowners angry. Some homeowners would even damage property; lowering the properties value even more. So the mortgage lenders come up with a perfect solution beneficial to both the Lender and the Homeowner: A Real Estate Short Sale.
Bank Specific Short Sale Process Help.
If you didnt find your banks link. Use the one Below.
This video talks about short sales from a real estate agents point of view. This is how most agents would sell the idea of a real estate short sale to a homeowner. They talk about: how does a short sale affect your credit and basic short sale vs foreclosure consequences. Continue reading for documented data and more clarity on the credit related question.
Real estate short sales are fast becoming one of the best alternatives to foreclosures. Lots of lenders have an established short sale system and human resources devoted to working with home owners and real estate agents. Short sales involve detail based paperwork that needs to be submitted in a timely matter. Working with an experienced short sale real estate agent can greatly improve a home sellers chance of a sale and decrease stress levels.
Common short sale question:
Many people ask how does a short sale hurt your credit? / How does a short sale affect your credit?
- Both short sales and foreclosures have a similar hit on your credit score (about 85 to 160 points)
- Credit score is also hit with 30 and 90 day late payment penalty (which could add up to a total of 200 to 300 points during the process) Fico Link and Fannie Mae.
Some sellers report hits as low as 100 points vs the 250 – 300 that come with a foreclosure. 100 points can be restored with good credit habits in a period of about 3 years vs a 300 point hit from a foreclosure which can take up to 5 – 7 years to restore. Every short sale situation is different; taking the short sale route gives homeowners a chance for less credit score hit and a faster recovery. But its not a guaranty dispute what some real estate agents might say.
Good news short sale sellers!
Buying a house after a short sale:
This is direct from Fannie Mae – info link.
That’s right in as little as 2 years. This is coming directly from the Fannie Mae consumer help website.
For anyone looking to do a real estate short sale.
Here’s a to do short sale checklist and short sale documents list. View, download, or print. Documents were produced by Fannie Mae’s mortgage help website specifically for short sales. Good luck.
Chart : How Does A Foreclosure, Missed Payment, And Maxed-Out Credit Card Change Your FICO Score
The company behind the popular FICO scoring model published a "What If?" series for common, specific credit missteps.
If you've ever wondered how your credit score would be affected by a missed payment or a maxed-out credit card, myFICO.com makes a look-up guide available to assess the probable damage.
Here's a few common financial difficulties and how they'll affect your credit scores, based on your "starting score".
- Starting score of 780 : 25-45 point drop
- Starting score of 680 : 10-30 point drop
- Starting score of 780 : 90-110 point drop
- Starting score of 680 : 60-80 point drop
- Starting score of 780 : 140-160 point drop
- Starting score of 680 : 85-105 point drop
Not surprisingly, the higher your starting score, the more each given difficulty can drop your FICO. This is because credit scores are meant to predict the likelihood of a loan default. People with lower FICOs are already reflecting the effects of risky credit behavior.
Also worth noting that the above is just a guide -- your scores may fall by more -- or less -- depending on your individuak credit profile. The number and type of credit accounts you hold, plus their respective payments and balances make up your complete credit history.
Protecting your FICO matters. When your credit scores are high, you get access to better, lower mortgage rates than the next guy. And every 1/8 percent matters to your household budget.
What rate will you get with your credit score?
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.