How many years does a short sale reflect on your credit score and is a foreclosure still 7 years; or more?

Asked by Doreen Glennan, Georgetown, TX Sun Nov 20, 2011

We own 2 properties, one we have deed for; other is primary residence. In current market if we sold the primary, after all costs we would have to come up with 20 to 30k most likely( so that is underwater). Since we will not have the cash until the first property sells we were told we must list primary as a short sale( not on market because of this). We are not behind on our mortgage, but we just do not have the cash if the primary were to sell first. Therefore, we only have the free and clear property for sale. Does anyone have advice? I thought we could possibly borrow (equity)on the clear/deed property if our primary sold first, but credit is tighter now ( ours has been good) but I have heard horror stories from folks in better financial shape than us about financing.

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Brian Rayl, Agent, Dallas, TX
Sun Nov 20, 2011
Credit score is not the only factor when considering financing. Loan to Value ratio (LTV) and debt to income ratios (DTI) also play a large factor. I had someone who had a 760 credit score and made VERY good money who could not qualify for a home loan because he had too much debt. You really should speak with a loan officer to find out exactly what you would be able to do for refinancing your home for your EXACT situation.

As far as selling your properties go, are you planning to sell both properties to purchase a different home or what exactly is your end goal? A short sell will normally show up on your credit as "settled for less than full" and that will remain on your credit for 7 years, just like most other dings. It will not affect your actual credit score nearly as much as someone else who does a short sale that has been behind on their mortgage for months and months. Foreclosures will remain on your credit for 7 years.

Many lenders can lend to someone with a short sale after a year, and some can do it immediately if you were never behind on your payment. A foreclosure is typically a 3 year hold for getting a new mortgage. Of course, the debt to income, credit score, and down payment amount will play big factors in these numbers.

Once again, it is best to talk to a loan officer to find out specifics for your area, and speak with a financial consultant regarding exact numbers for the credit stuff.

Best of luck to you
1 vote
Grazyna Jank…, Agent, Chicago, IL
Sun Nov 20, 2011
I do not know details about your properties. Sounds to me that you have just one loan on your primary resident. Your 2-nd rental property is paid off. In current market you will probably loose a lot of money selling the income property. I also do not know who is the Bank on your primary resident. I think, that the best would be to sell the property which is paid off. You could also contact an attorney who specialized in "short sales" to get some advise regarding your primary resident. Maybe you should consider moving to the property which is paid off and rent the primary home ? I would also call the Bank (primary resident) and try to ask if they would consider a "short sale" if you will current with your loan and sell the property for the current market value, which is below the amount you own to the Bank.Just you need to show a hardship that you can not keep this property.I hope it helps !
0 votes
, ,
Sun Nov 20, 2011
To answer your question, a negative item such as a short sale or foreclosure can be reported on your credit report for as long as 7 years. A bankruptcy can remain for as long as 10 years. As far as the ramifications of a short sale, depending on the loan program you seek and the circumstances, the wait can be immediately after a short if you didn't miss any payments in the past 12 months leading up to your short sale, or with late payments showing on your credit report, the wait can be as short as 12 months. Please read my article on the subject before considering any short sale.

Best of Luck!
0 votes
Abu Musa, Agent, New York, NY
Sun Nov 20, 2011
Short sale could be up to 3 years and foreclosure up to 7 years.
0 votes
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