How Will Short Sales Effect Your Credit?

One common concern homeowners express is whether a Short Sale will hurt their credit. The best response is that of all the options available to homeowners who are about to lose the home to foreclosure, the Short Sale is far and away the least damaging option. The faster the decision is made and paperwork is submitted for the Short Sale, the less damage will appear on credit records. The time that the Short Sale will show on credit records will vary from no negative listing at all to around two years. In the past Lenders generally required a homeowner to become seriously delinquent before they would consider a Short Sale. That means in the past the homeowner would start with at least three late pays on the record. Now many Lenders will consider a hardship package for a Short Sale even when the homeowner has maintained payments. When a family is living on savings or has severely dropped in income because of a job loss or family death, the hardship will speak for itself when all the evidence of bank statements, pay stubs and budget are submitted. On the other hand, a Homeowner who works out a deed in lieu of foreclosure will wait four to seven years for the deed in lieu to be cleared from the credit record. A foreclosure with a strong hardship situation, such as a family death, medical problem or job loss will carry with it a ding on the credit records for three to seven years. A foreclosure with no real extenuating circumstances beyond the homeowner’s control will haunt the Homeowner’s credit for five to seven years. A bankruptcy, which really only delays a foreclosure, will be on the Homeowner’s record for up to ten years. Someone who has gone through bankruptcy will most likely face yet another black mark on the credit record with a foreclosure, unless a Short Sale can be arranged once the bankruptcy is discharged. Another advantage of the Short Sale is that a family that has gotten a Short Sale worked out within a minimal timeframe may be able to very quickly qualify for another house. One reason is that without the underwater property burdening the Homeowner’s credit, the debt to income ratio will be much improved. This alone will start to improve the Homeowners credit score and allow them to qualify for a less expensive home within two or three years of the Short Sale, and sometimes sooner. There is real hope and encouragement for recovery that you can legitimately give the people you help who need a Short Sale to get out of a bad property situation. We won't be able to help everyone, but those people who are helped should be given realistic hope in the process. For more details visit us online at www.Texas-AgentsAdvantage.com or call us today!

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