Hi Shelly,
Not sure of the validity of this information but I was told that the Fed is looking at changing the short sale credit hit to the same 10 year period on your record as is with foreclosure/BKs in 2010. Again, I take this with a grain of salt, but if true, short sales should be considered as soon as possible from a credit hit stand point.
Suzanne Looker

Late payments will appear regardless, at the start.
Foreclosures, like Bankruptcy can be reported for up to 10 years.

One thing to consider is the legal paperwork and public record
filings regarding Foreclosures.

In either case, someone will need to start rebuilding credit.
See the link for Credit FAQ's

Fannie Mae sets the guidelines for mortgage qualification. Fair Isaac Corp. came up with the algorithm for calculating borrower risk. In term of the mortgage loan, Fannie says that for , Foreclosure it is 5-7 years and Short Sale it is 24 months before the lender can even entertain a loan application. They do take into consideration extenuating circumstances in the case of foreclosure; that is not the case for a short sale. After completion of the 'ding' to the credit score, they will be limited as to what they can get in terms of loan product - no cash out, no investment purchase, etc.

Here is a link from the Wall Street Journal on that topic.

http://online.wsj.com/article/SB1000142405274870378720457444…

I just wanted to thank all of the professional realtors that have answered and helped you get the information you are seeking. I love that I'm part of such a elite group of realtors. We need to continue to help and support each other.
Regards,
Suzanne Looker

Hi Shelly,

Here's the critical information, which I just copied from the FHA web site at

http://www.fha-home-loans.com/loan_qualifying_fha_loans.htm

FHA loans are the easiest type of real estate mortgage loan to qualify for. The FHA guidelines for loan qualification are the most flexible of all mortgage loans that require less than 5% down payment.

Following is the basic FHA loan qualification guidelines.

* Two Years of steady employment, preferably with same employer.

* Last two years Income should be the same or increasing.

* Credit report should typically have less than two thirty day lates in last two years with a minimum credit score of 620 or higher or in some cases no credit score at all.

* Bankruptcy's must be at least two years old, with perfect credit since discharge.

* Foreclosure's must be at least three years old, with perfect credit since.

* Your new mortgage payment should be approximately 30% of your gross (before taxes) income.

These are some of the most basic of FHA guidelines for qualifying for a FHA loan. If you have answered yes to most of these statements, you probably qualify for a FHA mortgage loan.

Hi Shelly,

This is a good question.

Here I go..When a homeowner goes into default on their mortgage and three late payments are reported to their credit reports, in theory their score should drop about 80 points. Then once the property is disposed of, either short, deed in lieu, or foreclosure than the "debt" is no longer on their credit reports therefore their score can go back up. Here is the wild card and this makes each case different. The credit cards are another type of credit called unsecured credit. Certain credit cards will close that consumer's credit accounts and that will cause an additional drag on their credit score. Some credit cards will reduce the limit to the current balance and they it will appear that the consumer is "maxed out". This causes a larger drop on the credit score. Sometimes if the consumer has 7 credit cards and all 7 reduce or close the accounts then the consumer might suffer a 150 point hit.
The good news is that Fannie Mae and Freddie Mac who set the lending guidelines say that a homeowner can get FHA financing in 24 months after a short sale and 36 months after a foreclosure, so long as the buyer meets the guidelines. This would be a job, income, money in the bank, a particular credit score, etc. Over the past 15 years so so their guidelines have changed anywhere from 18 months to 36 months FHA. For conventional financing it's 48 months.
Is this good stuff or what?
However, a buyer can obtain a new mortgage right away if the buyer is able to get into a new home with seller financing or a private lender. If the private lender is charging 12% as some try to do this would not be an ideal situation that you place your former homeowner new buyer in, the interest rate is just too high. Often I would suggest that the borrower go rent for a while repair and rebuild their credit rating. Save up a down payment and get back into a sensible mortgage in a home they can afford in 24-36 months. The other way to try to get your homeowner back into a new home is with seller financing for a 5 year window so that during the five years your client can repair their credit rebuild their credit rating and then apply for new financing with an institutional lender and work to refinance out the seller, if the seller wants to be cashed out at some point.
Smart savvy realtors are keeping track of their short sale clients because they can return to homeownership in 24 months after shorts. Only 20% of homeowners move out of the area after a short or foreclosure, therefore you have 80% of former homeowners that have tasted homeownership and most likely want it again.
A good resource for you would be CAR to confirm lending guidelines for your clients about the time frame. I wrote a book and would be happy to email it to you for your clients who are going through shorts. I also offer credit repair services and assist many realtors in repairing and rebuilding client's credit rating in preparation to return to homeownership in a sensilbe mortgage in a new home that they can afford. Good luck and I hope this helps!

Shelly,
With the right help of a good Realtor before, after, and during a short sale or foreclosure, we've seen credit hits be as little as 15 point drops across all 3 scores.
We've also seen several people buy their next home, during their current short sale/foreclosure process, and dozens more within the first 6-12 months.
Recovery comes in all shapes and sizes though, and you'll take the lessons forever. Most of boils down to how quickly you want to get back on the horse. Building/repairing credit is easy, and in most cases offered by realtors and mortgage consultants free of charge.
Dont be afraid, there is life after. Either way, you have options, and you are not alone.
Good luck, I'm happy to help.