Does Short Sale Affect Credit
Does Short Sale affect credit as much as a foreclosure or to what extent?
Thanks for your help.
Does Short Sale affect credit as much as a foreclosure or to what extent?
Thanks for your help.
What about doing short sale to get rid of overpriced home and buy a similar home for less money. Would the new bank know what happened with prior house?
For a objective answer to the question, you can experiment with different scenarios with FICO® Score Estimator. Of interest are the QUESTIONS they ask in getting a score.
http://www.bankrate.com/brm/fico/calc.asp
I ran a "very good" credit scenario which resulted in a FICO range estimate of 755-805.
I changed the scenario with ONE MORTGAGE currently late by 90 days. Specifically, the questions and answers I supplied:
7. When did you last miss a loan or credit card payment? " in the past 3 months"
Follow up: What is the most delinquent you have ever been on a loan or credit card payment? "90 days"
8. How many of your loans and/or credit cards are currently past due? 1
Follow up: What are your total balances on all currently past due accounts? 5000+
The result? a FICO range estimate of 615-665.
True the delinquencies on your debt will have trashed your credit score before the foreclosure or short sale is entered on your credit report.
The problem is the residual effect. A foreclosure stays on your credit report for seven years. I am told that you can probably get a new mortgage with decent interest rates 36 to 48 months after a foreclosure, provided your credit history has no other blemishes. I am told that the good mortgage rates are offered 24 to 36 months after a short sale.
What if no payments are behind or late. Will bank accept short sale because we know payments cannot be made anymore?[ Edited by rubyarias on Date 04/17/2008 ]
It may be that some banks would consider a short sale with all previous payments made. However, in my experience the owner must be late a few times before they will even discuss a short sale.