Does Anybody Know Exactly What Happens To Your Credit After A Real Estate Short Sale?
We were recently married, each came to the marriage with a home. We are selling one and are not in foreclosure but for financial reasons we need to unload the house. There is no way we will sell it for what we owe, we are in the suburbs of Detroit, Michigan. Home values continue to decline. Wonder if anyone had done a short sale in a similar situation and what your credit looked like after. It is my husband house entirely in his name and he currently has near perfect credit. Thanks in advance!
The article in the newspaper said that your score would go down to 600 after a short sale. That surprised me. If you were not behind on your payments, why would anything be reported to a credit agency. But it seems to be true..
Comment by huh? — November 5, 2009 @ 10:09 pm
The effect of a short sale (providing the sellers are more than 59 days late) on a seller’s credit report is identical to that of a foreclosure. The ding on credit will show up as a foreclosure in redemption status, Steep says, which will result in a loss of 200 to 300 points. This means a short sale with a previous FICO of 720 will see it fall from 520 to 420.
Many banks won’t consider a short sale unless you are late on payments. Most short sales are done after payments have been late.
About one third of your credit score is made based upon your payment history, that is, whether you have been 30, 60 or 90 days or more late on any bill that is reported.
If you pay your mortgage less than 30 days after the due date, that will not show up as late even though you will pay a late charge. But if you pay your mortgage 30 days or more late, that will definitely lower your credit score.
Fannie Mae guidelines allow a seller to immediately apply for a new loan to buy another home if that seller kept the payments current and had no 60-day late pays or greater on record.
Comment by Ed Atun — November 5, 2009 @ 10:26 pm