Foreclosure VS. Short Sale
Homeowner Consequences
When it comes to your future credit and your future ability to become a homeowner again, it's important to understand the realities and consequences of short sales amd foreclosures. The following table compares the effecta each option can have on your financial futre. Use this information to understand your options and make an informed decision about how to proceed.
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Future Fannie Mae Loan -Primary Residence | A homeowner who loses his home to foreclosure is ineligible for a Fannie Mae backed morgage for a period of five years. | A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed ortgage after twoyears. |
Future Fannie Mae Loan-Non-Primary Residence | An Investor who allows a property to go to foreclosure is ineligible for a Fannie Mae -backed investment mortgage for a period of 7 years. | An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed ortgage after twoyears. |
Future Loan with any Mortgage Company | On any future applications, all prospective borrowers will have to answer YES to question C in Section VIII of the standard 1003 form that asks "Have you had property foreclosed upon or given title or deed in Lieu therof in the last 7 years?" This will affect future interest rates. | There is no similar declaration or questin regarding a short sale. |
Credit Score | Score may be lowered anywhere from 250 to more than 300 points. Typicallly will affect a credit score for 3 years. | Only late payments on mortgage will |
Credit History | Foreclosure will remain as a public record permanently,and on aperson's credit history for 10 years or more. | A short sale is not reported on a credit history. There is no specific reporting item for "short sale". The loan is typically reported "paid in full, settled". |
Current Employment | Employers have the right and are actively checking the credit of all employees who are in sensitive positions. In many cases, a foreclosureis reason for immediate reassignment or temination. | A short sale is not reported on a credit report and is therefore not a challenge to employment. |
Future Employment | Many employers are requiring credit checcks on al job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment. | A short sale is not reported on a credit report and is therefore not a challenge to employment. |
Deficiency Judgement | In 100% of Florida residential foreclosures, the lender has the right toto persue a deficiency judgement. | The HAFA directive, which is effective April 5, 2010 states: "that upon successful closing of a short sale acceptable to the servicer, the borrower will be released from all liability for repayment of the first mortgage debt" and that "a portion of gross sale proceeds to be paid to subordinate lien holders in exchange for release and full satisfaction of their liens." |
Security | Foreclsoure is the most challenging issue against security clearance outside serious misdemeanors or felony convictions. If a client is a member of the police, military, CIA, or any other position that requires secuirty clearanc, in most cases clearance will be revoked and the position terminated. | On its own, a short sale does not challenge security clearances. |
