Short Sale Benefits

Immediately following a short sale your credit score will probably drop between 50 and 100 points. At that point you will be carrying less debt. Debt reduces your credit score and you will have a lower debt to income ratio following a short sale. Less debt will help your credit score and within a few years it should return to normal ratings. Any specific problems on your credit can be remedied through debt a dispute and negotiation process later.

In many cases, a short sale can erase your upside-down debt altogether and you will be eligible to purchase another home much sooner. All home loans owned or insured through Fannie Mae, Freddie Mac, FHA, and the VA have policies in effect that mandate debts be erased following a successful short sale. Under the Fannie Mae program you are eligible to buy another home in 2 years. FHA programs allow you to qualify for another FHA loan within 3 years.

Something people often fail to realize is that a short sale costs the homeowner practically nothing as all of the expenses are paid for by the lender. When a lender forecloses on a house to sell it again, they will pay all the costs associated with the entire transaction. In a short sale, the lender will also pay all of the costs including title insurance, any county taxes or fees on the sale, attorney’s fees, as well as any Real Estate commissions owed.

People who never plan to purchase another home and really don’t care about their credit rating at all could theoretically stop making their mortgage payments during a short sale which could take as long as 9 months to a year to complete. During that time they could save the money not spent on the mortgage or apply it toward a rental property if necessary. However, the better option is obviously to continue making your mortgage payments and complete the short sale process with your credit rating somewhat intact.