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Short Sale |
Foreclosure |
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Credit Score |
A short Sale itself will minimally affect your credit score, usually around 50 points. Late payments usually have the largest negative impact on your credit score from a short sale and can average 30 points or more each. | Your credit score could be lowered 300+ points and will stay on your record for 10 years! |
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Credit History |
There is not a credit reporting item for a short sale. Upon sale, your mortgage company will typically report the short sale as “Paid”, “Settled in Full” or “Paid as Negotiated” on your report. | A foreclosure will remain on your credit for 10 years and is permanent in the public records of your county. |
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Current Employment |
A short sale is not an actual item on your credit report and typically will NOT affect your employment. | Your employer has the right and many times will actively check your credit if you are in sensitive positions. Sometimes a foreclosure is grounds for immediate reassignment or termination. |
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Future Employment |
A short sale is not an actual item on your credit report and typically will NOT affect future employment. | Employers do check your credit history for many job applicants. A foreclosure is one of the most negative items you can have on your credit and may affect future employment. |
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Future Loan with a Mortgage Company |
You typically do not have to declare to future mortgage companies that you previously performed a short sale. | On the federally mandated standard loan application form 1003, you will be required to answer “YES” to the question “Have you had a property foreclosed upon or given title or deed in lieu thereof in the past 7 years?” Answering “YES” affects the interest rate you will receive. |
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Future Fannie Mae Loan – Primary Residence |
After a successful short sale you may be eligible for a Fannie Mae backed loan after only 2 years. | After a foreclosure, you will be ineligible for a Fannie Mae backed loan for a minimum of 5 years. |
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Future Fannie Mae Loan – Non Primary |
After a successful short sale you may be eligible for a Fannie Mae backed loan after only 2 years on non-primary residences. | After a foreclosure, you will be ineligible for a Fannie Mae backed investment loan for a minimum of 7 years. |
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Deficiency Judgment |
It is typical for the lender to give up the right to pursue a deficiency judgment against the borrower. This is stated in approval letters, and is not legal to collect in many states. | The bank has the right to pursue the deficiency judgment in all foreclosures (except in states where there is no deficiency). |
| Deficiency Amount | A short sale home is sold at or near market value and in most cases is a greater value than in a foreclosure sale which results in a lower deficiency. This deficiency is typically forgiven. This higher selling price helps to cut your lender’s loss. | If the home does not sell at a foreclosure auction it will have to go through the bank REO system. This will result in a longer sale time and potentially a higher deficiency judgment for the homeowner. |