Should I do a short sale or foreclosure in Springfield? A mortgage short sale occurs when a financially distressed borrower arranges a sale for less than the outstanding mortgage balance. The lender accepts the proceeds of the house sale which is short of the full repayment of the mortgage. The borrower, then, receives a release from the mortgage obligation. The lender does this to avoid what would amount to larger losses if it were to foreclose on the mortgage.
Is it better to do a short sale or foreclosure in Springfield?
NOLO says saving your credit score may be the most whispered reason for a mortgage short sale, however, according to myFICO, short sales, foreclosures, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts and are considered the same for purposes of your FICO score.
A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not use the word “short sale” on your credit report. Your credit report may read “paid in full for less than agreed” or “settled for less,” among other categories.
Waiting Periods after a Short Sale or Foreclosure in Springfield
There are differences in the waiting period until you can apply for a new loan. Fannie Mae’s 2016 guidelines allow you to reapply for a mortgage four years after a short sale with a 10 percent down payment.
If you sold your home as a short sale due to extenuating circumstances, you can reapply for a Fannie Mae-backed mortgage after two years with appropriate documentation of the circumstances. You may also qualify for an FHA loan one year after a short sale.
With a foreclosure, if your foreclosure was due to extenuating circumstances, you may be eligible to buy another home in three years. Otherwise, the standard waiting period remains seven years, notes Fannie Mae in its latest guidelines. Similar to its short sale guidelines, FHA allows those who foreclosed on their homes to reapply for mortgages after 12 months.
When you have waited the required time after a short sale or foreclosure, lenders don’t ask if you have sold a house as a short sale. They do ask if you ever had a foreclosure.
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