Stevie Morgan,  in Oklahoma City, OK

How does a Short Sale affect one's credit score?

Asked by Stevie Morgan, Oklahoma City, OK Tue Apr 22, 2008

I have been told several different things in regards to this question. I am trying to find out if it lowers one's score, does it prevent one from purchasing a home within the next year, how does it look compared to having an actual "foreclosure" on your credit?

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John Stimson’s answer
Short sales do hurt your credit and will keep you from buying a house for about 2 yrs. Missing the payments will usually do enough damage to their credit scores to prevent buying a home for awhile plus a short sale is said to drop your credit score 40- 80 pts. It is still alot better than the completed foreclosure.
0 votes Thank Flag Link Thu Mar 5, 2009
Hurts your score quite a bit and that would be the main thing preventing you from attaining a loan not the score. There is a new HUD program for people with a short sale 12 months out that can qualify for FHA.
1 vote Thank Flag Link Mon Oct 14, 2013
A short sale does affect your credit score negatively, but it only bruises it versus ruining it like a foreclosure. If everything else is paid and kept up to date it is very easy for someone to purchase a home within the next 2 years. As a Real Estate Professional, Short Sales are very time consuming and can be tricky, you have to deal with lenders wanting it done for free, the owner leaving out information because they do not know that it is important, buyers getting frustrated because they do not understand the process and the time that it's taking, and if you are not familiar with the paperwork you can end up doing circles for a very long time. I hope I gave you the information you were looking for plus some additional insight.
1 vote Thank Flag Link Tue Apr 22, 2008
Foreclosure is MUCH worse. Short sale is the best option there is, however, you need to make sure you don't have a deficiency judgement after the short sale is done. You also want to be insolvent at the time of your short sale closing.

It is getting easier and easier to recover after the short sale - with the new loan programs available.

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
0 votes Thank Flag Link Wed Oct 30, 2013
A short sale does adversely affect your credit, but not as much as a foreclosure.

I would recommend taking a loan out for the difference and paying off the mortgage instead of doing a short sale. Its better for your credit and paying back debt is the "right thing to do".

If one has the ability, paying back what you owe is the best thing to do.
0 votes Thank Flag Link Wed Jun 11, 2008

I would have to disagree with John's answer to your question.

By the nature of the term, "short sale" the lender is agreeing accept less than the total payoff amount. Anytime there is a settled payoff this reflects poorly on an individual's credit. Also I can't think of any situation where a lender would agree to a short sale unless the borrower is significantly delinquent. And as we all know, late mortgage payments have a serious negative impact on credit.

The short sales I have been involved with have all been on the buyers side, so I haven't had access to the seller's credit. However in all these cases the seller and the seller's realtor both are aware that unless the buyer is able to secure financing, the seller will lose their home to foreclosure.

Hope this helps.

Trey Bowden
Mortgage Lender
Edmond, OK
(405) 340-3277
0 votes Thank Flag Link Wed May 14, 2008
No it doesnt hurt your credit. Because the lender has to agree with the terms and especially in todays market u could short sale you house and turn around and buy a new one the next day. JOHN TRIM 281.685.0792
0 votes Thank Flag Link Sun Apr 27, 2008
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