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Short Sale Information

Short Sale Articles

Questions

Several questions run through a homeowner’s mind before doing a short sale. Will they qualify, will it affect their credit, are there any fees to pay? These are all valid questions, but unfortunately, not all lenders have the time or the patience to answer them. That’s why it helps to get informed on your own before making that call. Below are the answers to some of the most common short sale questions from borrowers today.

Will a Short Sale Affect my Credit?

Yes, but exactly how depends on various factors. If you were seriously in default before the short sale, then your score will drop further. If your bank reports it as forgiven debt or a pre-foreclosure in redemption, it also lowers your score by a certain number of points. There are also other short sale credit questions besides score drops, such as how long it takes to clear and how it’s classified by the credit bureaus.

How does a Short Sale Appear on my Credit Report?

The simplest classification for a short sale is a discounted payment. Basically, it tells the credit bureaus that your lender accepted less than what you owe as full settlement for your loan. Many lenders, however, report it as a pre-foreclosure in redemption. This is because many borrowers apply for a short sale when they are already in pre-foreclosure, or are already at high risk of losing their homes when the short sale closes.

What Happens to my Credit Score After a Short Sale?

Credit scores drop by a total of 200 to 300 points after a short sale. A large part of this is caused by the default, or the number of days you were behind on the mortgage. A loan that’s 60 days overdue will cause a score drop of 70 to 110 points in addition to the 85 to 160 points lost on the short sale itself.

How Long does a Short Sale Stay on Record?

The numbers vary by state, but a short sale appears on public record for 5 to 7 years. Foreclosures, on the other hand, take about 7 to 10 years to clear up.

Can I buy a Home After a Short Sale?

This opens the door to other short sale credit questions, such as the one above. Unless your mortgage servicer says otherwise, you can technically apply for a mortgage the day after you close—but the rates you will get won’t be very comfortable. It takes about 2 to 3 years for a credit score to recover enough to get reasonable rates, provided the borrower remains current during that period.