With more and more homeowners facing foreclosure nationwide, the short sale transaction is increasingly becoming popular for those who can not refinance their existing mortgages and are having a hard time looking for a buyer who will agree to their asking price.
Although a short sale will allow a distressed homeowner to avoid foreclosure, there is still considerable damage on the credit. In order for you to determine if you can live with them, here are the things you should expect from a short sale.
Credit Score
For many experts, the losses you will incur in terms of credit points from a short sale transaction are almost the same as an actual foreclosure. You can actually lose as much as 300 points. This means that if you have a FICO score of 700, you will be left with just 400. In the United States, it is very important for you to have a high credit score as it is a testament to your paying credibility. Those with high credit scores usually enjoy lower interest rate when they take out a loan.
Credibility
When you choose a short sale transaction, it will come up in your credit report as “pre-foreclosure in redemption status”. Although it sounds better than a “foreclosure” entry, you will still have to live with the fact that it is still a negative entry that can damage your financial reputation.
Waiting Period
This is perhaps the only advantage that a short sale has over a foreclosure. Instead of waiting for as long as 6 years - typical for a foreclosure victim - before you are qualified to buy a home at an acceptable interest rate, a short sale will only mean two years of waiting.
You must also remember that some short sale transactions will require you to settle the difference between the proceeds of the sale and the loan amount, depending on the state you are living in. To be sure, check the short sale procedure being followed in your area.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.
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