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Short Sales vs. Foreclosures and its effects on Credit…. Breaking the myth

Short Sales vs. Foreclosures and its effects on Credit…. Breaking the myth

There has been so much misinformation out there on the process of Foreclosures and Short sales; that I asked Katie Cook Hughes, Sr. Loan Officer at Prospect Mortgage in Tampa, Fl to clarify the situation for us!

                 I think that many sellers have been misinformed in regards to the effect  a short sale will have on their credit. Many sellers think that they can short sale their current home and then qualify to purchase a new home immediately after their current home is sold. This is incorrect.

A short sale will show up on a client’s credit report as a “pre-foreclosure in redemption status”. The short sale will cause a 200 – 300 point drop to your credit score. For example… if your credit score was a 680, it could potentially drop to a 380.

The effect of a short sale is almost identical to that of a foreclosure regarding your credit.

The benefit of doing a short sale instead of letting your home go into foreclosure is the amount of time that will need to pass before you can purchase a new home. Based on Fannie Mae’s guidelines, a buyer can purchase a home 24 months after doing a short sale, whereas the same buyer would have to wait 48 months to buy after a foreclosure

Got a question? Feel free to drop us an email at: info@TheTampaRealEstateInsider.com

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Written by Rae Catanese, Realtor

Licensed Realtor since 2002, Tampa Bay’s own Rae Catanese regularly gives expert advice and insider tips about the Tampa Bay real estate market via her blog, The Tampa Real Estate Insider. If you are thinking of buying or selling a home in the Tampa, St. Petersburg or Clearwater areas-then this blog is for you. I typically post articles once a week. To make sure you don’t miss my newest posts, you can subscribe here! Have a real estate question? Email me here!

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