Short Sales VS Foreclosures

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Issue Foreclosure Short Sale
Future Fannie Mae Loan (Primary Residence) A homeowner who loses a home to foreclosure is inelligible for a Fannie Mae-backed mortage for a period of up to 7 years! A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed mortage in as little as 2 years!
Future Fannie Mae Loan (Non-Primary Residence) An investor who loses a home to foreclosure is inellgible for a Fannie Mae-backed mortgage for a period up to 7 years! An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed investment mortgage in as little as 2 years!
Future Loan with any Mortgage Company On any future mortgage application, a prospective borrower will have to answer "YES" to the question that asks "Have you had property foreclosed upon or given title or deed-in-lieu thereof in the last 7 years?"  THIS WILL ALSO AFFECT YOUR INTEREST RATE! There is no similar declaration or question regarding a short sale.  FHA- If current at the close of a short sale, a homeowner may apply for an FHA loan IMMEDIATELY.  If homeowner is late before close of short sale, homeowner will be eligible for FHA loan after 3 years.
Credit ScoreScore may be lowered anywhere from 250-300 points.  Typically will affect score for over 3 years.Depending on the number of late payments, the score is generally lowered by 50 -150 points and may onlyaffect credit score for 12-18 months.
Credit HistoryForeclosure will remain as a public record on a person's credit history for 7 years or more.A short sale is not reported as a public record
Security ClearancesForeclosure is the most challenging issue against a security clearance outside of a conviction to a serious misdemeanor or felony.  In many instances, security clearances for a police or security officer, military memebr, or CIA are revoked and the homeowner is terminated.On its own, a short sale does not challenge most security clearances.
Current EmployentEmployers have the right and are actively checking the credit regularly of all employees who are in sensative positions.  A foreclosure, in many cases, is grounds for immediate reassignment or terminationA short sale is not reported as a public record and is therefore not a challenge to employent.
Future EmploymenrMany employers are requiring credit checks on all job applicants.  A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.A short sale is not reported as a public record and is therefore not a challenge to employent.
Deficiency JudgmentIf there is a recourse laon involved (non purchase money loan), the bank ahs the right to pursue a deficiency judgmentIn many cases, short sale lenders will waive their right to a deficiency judgment against the homeowner
Deficiency Judgment (Amount)In a foreclosure the home will have to go through an REO process if it does not sell at auction.  In most cases this will result in a lower sales price and longer time to sale in a declining market.  This will result in a higher possible deificiency judgment.In many cases, short sale lenders will waive their right to a deficiency judgment against the homeowner

 


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