Dallas Short Sales and the Effect on Your Credit Score

Dallas Short Sales and the Effect on Your Credit Score

Dallas short-sale vs. foreclosure: Many sellers wonder if a short sale will affect their credit less a foreclosure will and what the other advantages and disadvantages between the two. A homeowner in foreclosure, depending on state laws, could possibly stay in their property, rent free, for three to four months and sometimes up to a year before they are forced forced to vacate. But this fact alone does not mean aDallas foreclosure is better for them than a short-sale. A short-sale involves offering the property for sale, generally listed through the Dallas MLS. Potential home buyers will take a look at the property, some of them will make lowball offers.

Basics of a Short Sale

A Dallas short sale happen when a bank agrees to accept less than the amount owed on the mortgage because there is not enough equity to sell and pay the costs of sale. Not all lenders will agree to a short sale, and that is why a Dallas Realtor can be a tremendous help by contacting the lender's loss mitigation department to find out. You can't just unilaterally decide that you are going to sell your home at a loss and list it as a short sale. It used to be that lenders wouldn't even consider a short sale if your payments are not behind on your payments, but that has changed. However, lenders will be more agreeable to negotiating if your payments are in arrears.

How is a Seller's Credit Affected?

Dallas Foreclosures or Deed-in-Lieu of Foreclosure: Both of these choices affect credit ratings poorly. A foreclosure can lower your credit score by 200 points and take up to seven years to recover.

Short Sale: A short sale can lower your credit score by as little as 50 points and only take two years to recover from.

Waiting Period Before Buying Another Home

Foreclosure or Deed-in-Lieu of Foreclosure

A seller who wants to buy another home after foreclosure will need to wait about up to 72 months before they can qualify for another mortgage.

Short Sale

The good news is a short sale will allow you to obtain a mortgage in about two years. Unlike with a foreclosure, always negotiate with your lender a release of liability when doing a short sale. This means that the lender will take the money it receives from the short sale as payment in full. This means they won't be able to come after you for a deficiency judgment and lien you bank accounts and salary.

FHA adopted guidelines in 2010 that say a seller who is current and does a short sale may qualify to immediately buy another home. Lenders aren't so quick to follow those guidelines. Fannie Mae guidelines allow a seller to immediately apply for a new loan to buy another home if that seller kept the payments current, had no delinquencies exceeding 30 days and did not agree to repay the debt relief. Moreover, it's the late payments that dramatically affect your credit report, not the short sale.

Foreclosure or Short Sale - The Decision

If you are trying to decide whether to let your home go through foreclosure or selling it via short sale due your due diligence, speak with a professional Realtor how specializes and seek legal and account advice. There are other advantages to a Dallas short sale over a foreclosure.

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