Short Sale v. Foreclosure which is worst? Forclosure!

Many homeowners facing foreclosure are overwhelmed by the prospect of loosing there home.  When it comes right down to it, it makes sense for a homeowner to exit the home on their terms.  Enter in the Short Sale.  In many cases when a homeowner cannot afford the home any more, the best alternative to foreclosure is short sale.  Below is a explanation of the possible results or either a short sale or foreclosure.

Fannie Mae Mortgage Eligibility (Primary Residence):

• homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.
• A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after 2 years

Fannie Mae Mortgage Eligibility (Non-Primary Residence):

• An Investor who allows a property to go to foreclosure is
  ineligible for a Fannie Mae backed investment mortgage for a period of
  7 years
• An investor who successfully negotiates and closes a short
  sale will be eligible for a Fannie Mae backed investment mortgage after
  2 years.

Future Loan with any Mortgage Company:

• On any future loan application, a prospective borrower will have to
  answer YES to question C in Section VII of the standard 1003 that asks
  “Have you had property foreclosed upon or given title or deed in lieu
  thereof of the last 7 years?” This will affect future rates.
• There is no similar declaration or question regarding a short sale.

Impact to Credit Score:

• Score may be lowered anywhere from 250 to over 300 points due to a foreclosure. Typically will affect score for over 3 years.
• Only late payments on mortgage will be reported as paid or
  negotiated. This will lower the score as little as 50 points, if all
  other payments are being made. A short sale’s affect can be 12 to 18
  months on an individual credit score.

Credit History:

• Foreclosure will remain as a public record on a person’s credit history for 10 years or more.
• Short sale is not reported on a credit history. There is no specific reporting item for “short sale.”

Security Clearances:

• Foreclosure is the most challenging issue against a security
  clearance outside of a conviction of a serious misdemeanor or felony.
  If a client has a foreclosure and is a police officer, in the military,
  in the CIS, Security, or any other position that requires a security
  clearance will be revoked and position could be terminated.
• Short Sale, on its own, does not challenge most security clearances.

Current Employment:

• Employers have the right and are actively checking the credit
  regularly of all employees who are in sensitive positions. A
  foreclosure, in some cases, can be grounds for immediate reassignment
  or termination.
• Short Sale is not reported on a credit report and is, therefore, not a challenge to employment.

Future Employment:

• Many employers are requiring credit checks on all job applicants. A
  foreclosure is one of the most detrimental credit items an applicant
  can have and in most cases, will challenge employment.
• Short sale is not reported on a credit report and is therefore not a challenge to employment.

Deficiency Judgment:

• In 100% of foreclosures (except in those states where there is no
  deficiency), the bank has the right to pursue a deficiency judgment.
• In some successful short sales, it is possible to convince
  the lender to give up the right pursue deficiency judgment against the
  homeowner. In Wasingtion State the primary lender cannot pursue a deficiency judgement.

Deficiency Judgment (amount):

• In a foreclosure, the home will have to go through an REO process
  if it does not sell at auction. In most cases, this will result in a
  lower sales price and longer time to sell in a declining market. This
  will result in higher possible deficiency judgment
• In a properly managed short sale, the home is sold at a
  price that should be close to market value and, in almost all cases,
  will be better than an Foreclosure sale resulting in a lower deficiency.

Losing your home is always hard and if you are facing foreclosure contact Dan Edwards your local CDPE

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1. Check your facts; foreclosure is NOT an epidemic, but we can handle it!
2. More Education: Certified Distressed Property Expert(CDPE)
3. Time is running out to utilize the FREE $8,000 tax credit