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  3. Spring Hill Florida Short Sales versus Foreclosures - The Effect on Your Credit Rating
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Spring Hill Florida Short Sales versus Foreclosures - The Effect on Your Credit Rating
July 12, 2009
Author: Support Services, e-PRO

If you are among the many homeowners in Spring Hill, Hernando County Florida seeking to avoid foreclosure you do have several options, one of which is performing a short sale. Some homeowners, depending on their equity situation, may allow their home to go into foreclosure instead of considering a short sale. One feeling is they didn’t want to keep the house in the first place. By accepting a short sale, the mortgage holder can preclude a drawn out and expensive foreclosure, and the home owner is allowed to satisfy the mortgage for less than what they owe. The primary concern above all is the affect both a foreclosure and short sale will have on your credit score.

What is a Short Sale?

The basics of a short sale are very simple. A short sale happens when the sale price of a house fall short of what the homeowner still owes on their loan. Most mortgage lenders will agree to accept the sale price of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot legitimately make the mortgage payments in full. A few words of caution are for your consideration. Not all lenders will consider a short sale. For example if your monthly payments are current, yet you foresee cash flow problems approaching that will limit your ability to make your monthly mortgage payment a short sale may not work for you. Not yet, that is. Mortgage lenders in this part of Florida hard hit with cash flow have no self interest in negotiating a short sale with you unless your payments are at least three months late.

The Credit Affects

Foreclosure

Undoubtedly sellers will incur severe damage on their credit report by going through foreclosure. Your credit score will take plunge between 200 to 300 points.

Short Sale

Short sales have a far less impact on a homeowner’s credit score. Credit reports typically lose less than 80 to 100 points. What happens to your credit in the future? It is takes about three years after a foreclosure before a mortgage company will offer a sane interest rate, whereas a homeowner who went through a short sale typically waits about 18 months to buy another home at a fair APR.

Protecting your credit rating should always be the primary motive when making the choice between a short sale and allowing foreclosure. The savings in interest alone should be moving enough for most folks, not to mention your rebound in buying power in the near future.