If you’re trying to decide whether or not you should do a short sale on your Southern Maryland home, you’re asking yourself “Will a short sale affect my credit?” When the choice between years of credit damage from a foreclosure and some derogatory credit from a short sale are your only two options, many choose to start seeking buyers for a short sale. Here we’re going to go over everything you need to know about credit scores and short sales, so let’s get started.
What is a Short Sale?
First things first, what is a short sale? In Southern Maryland short sales are becoming increasingly popular for people who are facing foreclosure. If you have more debt than you can repay, you’ll be able to get your lenders to accept selling your home for less than its worth. Getting the lenders to accept the short sale offer is the hard part, and that’s why you need a real estate agent who can list your home and get people to start putting down offers. If you can show the lender or bank that you have people interested in buying the property you have a much better chance of being successful and selling your home.
How Does a Short Sale Affect Your Credit?
Some say that a short sale drops your credit rating just about as much as a foreclosure, but your credit is really affected by how many days you’re late on your payments. If you keep paying your mortgage and stay below 30 days late or in arrears, you’ll be able to keep your credit intact. If you let your payments go 30 days or more, each 30 days will drop your score. A short sale can drop your score on average about 85 points, but 90 days late can be 135 points lost on your credit report. Each situation is different, and the faster that you can get it resolved the better the outcome.
Many choose a short sale so they can move into another house faster, and again this will depend on how far behind you are on your current payments. If you’ve been less than 60 days late in most cases you can get another FHA (Fannie Mae) loan and be in another house quick. A foreclosure on the other hand can drop your credit score by 160 points, and bankruptcy can bring it down 240 points. If you did get behind you may have to wait two years or more to get another home loan.
Is a Short Sale Worth It?
Short sales are a great way for many people to avoid foreclosure and significant damage to their credit, but there is always the chance that you won’t be able to find a borrower or the bank/lender won’t approve the short sale. Either way, a short sale almost always beats foreclosure. If you’d like more information about short sales, check out my short sale information page.