Hi Odie, if it were I, I would attempt a Short Sale instead of a foreclosure. Credit bureaus put short sales in a different scoring bucket than foreclosures when generating a score. The foreclosure bucket is dealt with more severely in that it takes longer to recoup the points lost by the event.
Besides the scoring by the credit bureaus, lenders (read Fannie & Freddie) allow a return to the best rate pricing sooner with a short sale (2 years) than with a foreclosure (5 years). For a Short Sale the Credit score hit ranges 80-200 points from best case to worst case with short sales. Figure itâ€™s closer to 200 points with a foreclosure.
While its true that your credit report will take a hit, your score will be negatively affected for 2 years after the foreclosure and it will show in the "derogatory" section of the credit report 7 to 10 years. Subject to change, lenders will also not lend to anyone who has had a foreclosure/short sale within 3 years.