Affects of a Short Sale or Foreclosure on Credit Scores and Qualifying for a New Home
How is the Seller’s Credit Affected?
Sellers will take a larger decrease in their credit score by with a foreclosure. On a FICO score (the formula used to assess a borrower’s risk factor) based on credit bureau interviews are as follows:
· Foreclosure or Deed‐in‐Lieu of Foreclosure:
Both of these solutions affect your credit score the same. Sellers will suffer a 250 to 280 decrease in their score.
· Short Sale:
The affect of a Short Sale on a seller’s credit report is much less damaging. The ding on credit will show up as a pre-foreclosure, which will result in a loss of 80 to 100 points.
Waiting Period Before Buying Another Home
· Two years with a short sale
· 5 to 7 years with a foreclosure
Short Sale / Foreclosure Deficiency Judgments
· The bad news is a seller could be subject to a deficiency judgment for the difference between the loan amount and the loan balance.
· In California, purchase money loans are not subject to deficiency judgments; however, hard money loans, home equity loans and refinances are.
· The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted.
· To determine whether a pending foreclosure or Short Sale is subject to a deficiency judgment, talk to a real estate lawyer. We can provide you a list of advisors.
· For sellers trying to decide whether to let a home go through foreclosure verses attempting a Short Sale, saving their credit is the chief benefit to doing a Short Sale. Be sure to ask for legal and tax advice before making a decision.
You can request a short sale package that provides you with forms and information to get you started. Packaging of the hardship and short sale package is extremely important to the success of a short sale and it takes experience and attention to detail. The Lilly Team at PMZ Real Estate is experienced and certified short sale specialists and alternatives to foreclosure consultants. Call us and ask for you free short sale hardship package or consultation at 209-479-9222 or e-mail us at hlilly@pmz.com .
Stockton Neighborhoods: Brookside, Lincoln Village, Morada, Morada Ranch, Beck Ranch Spanos Park, West Spanos Park, Weston Ranch, Port of Stockton, UOP.
Stockton and Lodi Zip codes: 95208, 05204, 95205, 95206, 95207, 92209, 95210, 95212, 95215, 95219, 95242. 95240
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