Susan Hilton College Station Real Estate
Realtor & Vice President of Sales of Bryan College Station Real Estate
Read my blog below
So if you know someone who is behind on their home mortgage loan in the Bryan College Station area and you want to give them advice on which is better – a Short Sale or a Foreclosure. Hate to say it but there is a HUGE difference long term. Over the next few posts we will compare the two and see how much a difference they really make.
First, lets talk about the definitions of Short Sale and Foreclosure. A Short Sale is when a homeowner sells the house but the bank does not get enough money from the sale to pay off the outstanding loan. When a property is foreclosed the bank takes the property back at the Court House Sale due to a breach of the agreement to pay.
There are many many issues to consider –
- Future home purchases – With a foreclosure you are not eligible for a Fannie Mae backed mortgage (which is a HUGE portion of the housing loans) for up to 7 years. (efanniemae.com) With a short sale, you are eligible in about 2 years.
- Future investor purchases – With a foreclosure the investor is not eligible for a Fannie Mae backed mortgage for up to 7 years. With a short sale you are eligible in 2 years.
- Other future loans – When you apply for a home loan with ANY LENDER you will be asked to complete a 1003 application. On the application, they ask if you have had a foreclosure or given a deed-in-lieu in the last 7 years. You do NOT have that question for a short sale. The foreclosure will affect your interest rate.
- Credit score – Foreclosure affect is about 250-300 points and will affect the score for about 3 years. Short sale affects are as brief as 12-18 months and should show that the loan was “paid as agreed,” “paid as negotiated,” or “settled.”
- Credit History – The foreclosure will stay on the public record on your credit history for 7 years or more. Short sales are not normally reported except as “paid as agreed,” “paid as negotiated,” or “settled.”
- Security Clearance – A foreclosure WILL affect security clearance with police, security offices, military or CIA.
- Current Employment – Employers may (and do) check credit reports if an employee is in a sensitive position. A foreclosure may be a case for termination. Remember a Short Sale is not reported to the credit bureau in the same way therefore should not be an issue.