What Are The Benefits To Doing A Short-Sale – Sherman Oaks Real Estate

by Mario Acosta on June 17, 2011

in Sellers, Short-Sale

Considering a Short-Sale for your Sherman Oaks home? There are two parts and scenarios that need to be considered.

Credit Bureau Reporting

Let’s start with how a short sale will be reported to the credit bureaus. In cases of both  short sale and foreclosure, any delinquent mortgage will negatively affect credit ratings.  But short sellers will have verbiage in their credit report stating that they worked out a deal with their lender. Such terms reported by lenders are “debt settled for less than what was owed,” “debt settled,” “debt settled with agreement” or some other similar verbiage dependent on each particular lender. A short sale can possibly be less damaging to your credit score and there are cases where the damage was as little as 50-100 points.  Compared to a foreclosure which, mortgage and credit experts say that other than bankruptcy, has the worst affect on credit scores.  A foreclosure can possibly reduce a credit score by over 300-400 points.

Payment Default

The next situation that determines any potential credit damage is whether you are late on your payments or not. Once you stop making payments,  lenders will report you 30, 60, 90 days late all the way out to 150 days late which all contributes to the degradation of your credit. If you have two loans then the damage can be even greater. People who are late on their payments will suffer more severe credit damage than those who never miss a payment and do a short sale. And YES you can do a short sale in certain situations even if you are not behind on payments.

Buying A Home After A Short-Sale

Sherman Oaks homeowners who successfully complete a short sale may also qualify for a mortgage at a reasonable interest rate in as little as 24 months. So, if buying a home is a future goal, then a short sale is the better option for most families. Fannie Mae and Freddie Mac have changed their guidelines (August 2008) which state if you have a short sale on your record, you may be able to buy another home in 24 months with financing that is ultimately going to be backed by them. As compared with a foreclosure on your credit record which will require you to wait 5-7 years for financing backed by Fannie or Freddie.

 

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Post by Mario Acosta

Mario has written 117 articles.

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