Short Sale SellersShort Sale My House
When your home value falls, especially over 20%, you might be tempted to letting the house go into foreclosure or attempt to work out a short sale agreement with your bank.
Realize that even giving up your current home and paying less for a future home can cost even more than just money. You can be putting your finances into a riskier situation. Both foreclosures and short sales involve you giving away or selling your home in a non-traditional matter. A foreclosure involves the bank repossessing your home due to missed mortgage payments and a short sale is when you sell your home at less than what is owed on the mortgage due to missed payments and your inability to keep up with making those payments.
Credit Implications
Your FICO score will get a hit by over 100 points due to a foreclosure. Short sales even have an effect on credit, if the sale was reported: “settled for less than what was owed”. Your credit report will tell credit card companies to consider rate hikes, credit limit decreases and insurance companies to raise your premiums.
Timeline To Buy Another Home
The time frame to purchase another home after a foreclosure or short sale differs from each lender, but FHA loans will typically require a 3 year waiting period for both situations. However, the waiting period is evaluated on a case-by-case basis. If the short sale was a result of significant decline in value, the homeowner was making their payments on time and the sale was needed for a job relocation – this would be an exception to rule.
Of course, the lender will evaluate how you’ve handled your bills since the foreclosure or short sale. In addition, renting may be difficult immediately following a foreclosure or short sale as many landlords or apartment complexes will check your credit report.
Employment and Credit Rating
For future employers who check credit rating, they will see that your home has been foreclosed upon or sold short and it may affect their hiring decision. You may be disqualified for the position or have to explain why you decided to leave your home.
Uncertainty of Rising Home Values
No one is sure on what home prices will look 2 to 3 years down the line. If you leave your home, you are left with an uncertainty of future interest rates and home prices. A new house may cost more or interest rates may be higher.
Other options
Try adjusting your expenses to avoid foreclosure or a short sale if you do not want to lose your home. Or you can check with your bank or lender for a loan modification to lower your monthly mortgage payments.