EXPERIENCE: After working as an asset manager, Frederic Din has been a real estate agent in Imperial Valley for 20 years. He works for Exit Stepping Stone Realty and operates the Imperial Valley REO Web site.
What are the requirements to qualify for a short sale?
Typically the homeowner owes more on their home mortgage than the home is worth and/or they can no longer afford the monthly payments. The short sale homeowner has to have a hardship, which can be from unemployment, reduction in income, divorce, separation, death of spouse/family member, financial burden/payments increased, business failure, job relocation, illness/medical bills, damage to property/unable to repair and military service.
What is the difference in the way that a short sale affects your credit rating vs. a foreclosure?
The differences vary widely, as a short sale may have little or no impact to a person’s credit rating unless there is a default or payment delinquency involved. Typically a seller can purchase another home with 24 months on average (or so) after a short sale.
A foreclosure on your credit rating is a public records entry and is on your credit history for 10 years. Obtaining a mortgage will be more difficult to obtain after having a foreclosure on your record and may keep those from buying another home for four years or more, each mortgage and lender have different requirements and it may be longer if credit standards are further tightened.
Can a seller do anything to minimize the credit rating drop from a short sale?
If the homeowner is current on their mortgage and keeps their mortgage current during the short sale process, there will be no mortgage delinquency on their credit rating. Typically after the short sale has been completed, the mortgage loans will be classified in a variety of ways by the lender (each are a bit different), however they will be classified as “settled for less than owed” or “settled in full,” or “paid in full,” or some variance.
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