If you wife is not on the loan, her credit should not be affected by a short sale or foreclosure whatsoever. Being on title and being on the loan are 2 separate entities entirely.
For example: many people mistakenly believe when they get a divorce that all they have to simply do is Quit Claim the property over to the person who will be keeping the house. But that does not change the fact that the former spouse is still on the loan (assuming of course that both spouses are on the mortgage loan). So for the purposes of our example lets say your former spouse is keeping the house after the divorce, but fails to make payments, the fact that you Quit Claimed off of the title does not release your obligation to pay the mortgage loan.
For your own credit and peace of mine, I would highly recommend that you have a very experienced short sale agent handling the sale of your property. Here are the 3 main benefits of a short sale vs. a foreclosure...
#1. Damage to your credit after a short sale will be less severe than the damage caused by foreclosure.
#2. Fannie Mae and Freddie Mac guidelines state that you could potentially finance another house 2 years after a Short Sale, whereas if you have a foreclosure that time frame increases to 7 years.
#3 . I have been conducting short sales for nearly my entire 10 year real estate career, and have never had a bank come after one of my clients for the deficiency after a short sale, but I have seen many banks come after people for the deficiency after a foreclosure.
Good luck to you in your short sale, and if my team can be of any help please let me know.
John Goad, Jr.
of The Goad Team
Century 21 Infinity
This question would be better answered by someone in the banking industry (perhaps a lender) rather than a real estate agent. However, I am going to make an educated inference that you wife's credit should not be affected if she is not on the loan. To further protect her, I would suggest filing a "quit claim" deed to remove her as an owner of the property.
You may want to consult a real estate attorney to be sure the quit claim deed will release her from any financial and ownership responsibilites on the property. The consultation fee would be money well spent in a situation like this. The attorney may even be able to draft the document and file it for you for a nominal fee. I can refer you to a reputable and affordable real estate attorney if you need a recommendation.
Please let me know if you would like to dicuss alternative to foreclosure. I specialize in selling short sales and distressed properties and am knowledge on all of the loan modifciation programs currently offered.
Please give me a call and we can set up a time to meet.
Prudential Americana Group Realtors
871 Coronado Center Dr. #100
Henderson NV 89052
cell (702) 544-4022