How does a short sale or foreclosure affect my credit? When can I buy a home again?
Get answers to your questions: When can I buy after a short sale or foreclosure, how does a short sale affect my credit compared to a foreclosure, What are some of the unknown issues concerning a foreclosure that can get me fired from my job or affect my future employment? The following information will answer questions that you may have if you are facing eminent default and are facing foreclosure. In most cases you will find that a short sale is a better option if you are upside down on your property. Find out all the pros and cons to doing a Short Sale vs. a Foreclosure.
1. WHEN DO I QUALIFY TO PURCHASE ANOTHER HOME USING A FANNIE MAE LOAN?
Future Fannie Mae Loan Primary Residence
Foreclosure: With some exceptions based on extenuating circumstances, a home owner who loses their home to a foreclosure may be ineligible for a Fannie Mae Loan for up to a period of 5 years. See fanniemae.com
Future Fannie Mae Loan Non-Primary Residence
Short sale: An investor who successfully negotiates and closes a short sale is eligible for a Fannie Mae backed loan within a period of 2 years
Foreclosure: With some exceptions based on extenuating circumstances, an investor who loses their property to a foreclosure may be ineligible for a Fannie Mae Loan for up to a period of 7 years. See fanniemae.com
2. WHEN DO I QUALIFY TO PURCHASE ANOTHER HOME WITH ANY MORTGAGE COMPANY?
Short Sale: There is no declaration or question regarding a short sale. FHA – If current at the close of short sale, a homeowner may apply for a FHA loan immediately. If homeowner is late before close of short sale closing, will be eligible for FHA loan after 3 years.
Foreclosure: On any future application, a borrower will have to answer YES to the question C in Section VII of the standard 1003 form that asks the question: “Have you had a property foreclosed upon or given title or deed-in lieu thereof in the last 7 years? This will affect all future rates”.
3. HOW DOES A SHORT SALE OR FORECLOSE AFFECT MY CREDIT SCORE?
Short Sale: Only late payments on mortgage will show and after sale, mortgage is normally reported as “paid as agreed” “paid as negotiated” or “settled”. This can lower score as little as 50 points if all other payments are made on time. A short sale’s effect can be as brief as 12-18 months.
Foreclosure: Score may be lowered anywhere from 250 to over 300 points. Typically will affect score over 3 years. They longer you are in default the lower the credit score.
4. HOW DOES A SHORT SALE OR FORECLOSURE AFFECT MY CREDIT HISTORY?
Short Sale: A short sale is not reported on a person’s credit history. There is no specific reporting item for “short sale”. In most cases a loan is typically reported “paid in full”, “settled “, “paid as negotiated”
Foreclosure: Foreclosures will remain as public record on a person’s credit history for 7 years or more.
5. HOW DOES A SHORT SALE OR FORECLOSURE AFFECT MY JOB?
Security Clearance: If your job requires a security clearance, this may affect your job. If a person had a foreclosure and is in the military, is a security persons, a police office, in the or in the CIA, this in most cases will revoke your clearance. In a short sale, this usually will not affect a clearance in most cases. Ask your HR department if you have concerns.
6. HOW CAN A FORECLOSURE OR SHORT SALE AFFECT MY FUTURE EMPLOYMENT?
Short Sale: A short sale is not reported on a credit report and is therefore not a challenge to employment.
Foreclosure: Employers or future employers have the right and are actively requiring credit checks on all their employees who are in sensitive positions. They also check job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge future employment.
If you are upside down on your mortgage and are facing foreclosure, make sure you talk to a professional before you decide to walk away from your house. In most cases a short sale is a better option than a foreclosure.