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If I Short Sale what will Happen to My Credit

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By : Roby Hicks    99 or more times read
To understand the effect of short sale on your credit score, you have to know what it is first. This is a real estate arrangement wherein the value of selling the estate is less than the balance owed to the lender. Because of this, the homeowner should get the approval of the lender first. The lender has to assess the losses he will incur when he agrees to it.

There are various reasons why homeowners pick short sale over foreclosure. One is that the homeowners are still able to pay a certain amount of the balance due. They can also benefit from a portion of the proceeds. Many think that foreclosure is more advantageous because even if they default, they can still stay in the property for a certain period depending on what the state law stipulates. In short sale on the other hand, the potential buyers do not guarantee to make good offers.

Some opt for foreclosure because it is less tiring than a short sale. If you choose to have a short sale, you need to exert a lot of efforts. You need to prepare the house. It does not only need to look presentable, but it also has to be safe. You have to remove all items that may cause problems during the open house. You have to post ads and make sure that buyers know about your intention to sell.

The question remains. Will it affect your credit score? There are several wrong information about the effect of short sale in your credit score. Some say that the damage it will do to your score is lesser than the damage the foreclosure will do. However, this is not always the case. Understanding its effect will help you prepare in the future.

According to an expert, the damage that the short sale does to your credit score is similar with what the foreclosure will do. This is because credit bureaus and lenders view it similarly. Short sale is part of the definition of foreclosure. And it is seen as serious delinquency when tabulating your credit score.

You have to consider several aspects if you want to get into short sale. Most lenders would easily engage in this transaction right away, but not all. This is especially true if there are other options. Lenders may see it more valuable to foreclose your home. If you have remaining assets, the lenders can tap into that. In order to get their approval, you have to convince them that it is your only option.

There are a lot of reasons why you have to pick short sale over foreclosure. First, it allows you to pay the lenders. In addition to that, you are able to purchase a new home after two years. If you choose to foreclose, it will take five years before you can buy a new home again.

Certainly, there are more benefits in choosing a short sale. Although it will not reduce the damage done to your credit score, it is easier to repair.
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