Short Sale SellersShort Sale or Let it Go Into Foreclosure?
There has been a debate over whether short sales will not hurt your credit score as much as a foreclosure. Finally there is an agreement that they will both hurt the homeowner by decreasing your credit score 200-300 points, however there is a pro to choosing a short sale vs a foreclosure route.
The biggest reason is that a distressed short sale homeowner will have the ability to make a large home purchase in the near future, rather than 7 years from the date of foreclosure. A short sale will not protect their credit rating but instead protect their ability to obtain financing in the future. Fannie Mae and Freddie Mac have already specified that a borrower will be able to qualify for a mortgage loan in less time, even if a pre-foreclosure (short sale) or bankruptcy exists on the credit report. A foreclosure on the other hand will disqualify the borrower for the longest period of time.
Once a short sale is completed successfully, the credit reporting agencies are updated. Many short sale sellers can see an improvement in their credit score in as little as 2 to 3 years. It’s important to seek ways to repair credit after a short sale.