Short Sales and your Credit
Do you have questions about how a short sale will effect your credit?
Replies to This Discussion
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Permalink Reply by Stephen Shafer on
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My understanding is that the borrower will take a 200 piont hit to their FICO,it will be on their record for 3 years as paidbut not in full. Is this true?
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Permalink Reply by Paula Evans on
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Yes..this is true but the mortgage companies don't always update the credit report after a short sale so it may be listed as a foreclosure until disputed.
Stephen Shafer said:My understanding is that the borrower will take a 200 piont hit to their FICO,it will be on their record for 3 years as paidbut not in full. Is this true?
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Permalink Reply by Jeff Payne on
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You can not put a blanket statement about credit and a short sale. There are too many variables to be able to answer this question. If the borrower is not in default, if they have not missed any payments, their credit most likley will not see a huge hit. Also depends on how it is reported to the credit bureaus.
I have sellers whose credit was not affected at all and some who saw a 150 point drop because theystopped making their payements.
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Permalink Reply by Katerina Gasset on
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We have plenty of sellers who after a short sale their credit scores actually went up. We have those who have such terrible scores because they did not make a mortgage payment for over 2 or 3 years. Going 120 days late drops your credit score to foreclosure levels so the homeowner is going to take a bad hit in being so late.
But we have plenty of homeowners who did not go late on their payments and got a short sale and it only shows on their credit report that they paid their loan off in full. That is a good mark.
Like Jeff says- it all depends!
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Yes..you are correct. There are many variables when it comes to a short sale and that is why it is very important to check the credit report after a short sale.
Jeff Payne said:You can not put a blanket statement about credit and a short sale. There are too many variables to be able to answer this question. If the borrower is not in default, if they have not missed any payments, their credit most likley will not see a huge hit. Also depends on how it is reported to the credit bureaus.
I have sellers whose credit was not affected at all and some who saw a 150 point drop because theystopped making their payements.
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Yes..but a lot of banks will not accept a short sale until you miss payments so it can hurt the credit if that is the case. I wish more banks would allow a short sale before you are late.
Katerina Gasset said:We have plenty of sellers who after a short sale their credit scores actually went up. We have those who have such terrible scores because they did not make a mortgage payment for over 2 or 3 years. Going 120 days late drops your credit score to foreclosure levels so the homeowner is going to take a bad hit in being so late.
But we have plenty of homeowners who did not go late on their payments and got a short sale and it only shows on their credit report that they paid their loan off in full. That is a good mark.
Like Jeff says- it all depends!
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I have found that there are more banks that will approve with the short sale without the borrower missing payments. I believe that I have only had one denied because of it, actually it was because the seller probably didn't really meet the short sale requirements.
I do agree that banks need to be more proactive and not make default a requirement for a short sale. That just costs everyone more money except the banks attorney :)
Paula Evans said:Yes..but a lot of banks will not accept a short sale until you miss payments so it can hurt the credit if that is the case. I wish more banks would allow a short sale before you are late.
Katerina Gasset said:We have plenty of sellers who after a short sale their credit scores actually went up. We have those who have such terrible scores because they did not make a mortgage payment for over 2 or 3 years. Going 120 days late drops your credit score to foreclosure levels so the homeowner is going to take a bad hit in being so late.
But we have plenty of homeowners who did not go late on their payments and got a short sale and it only shows on their credit report that they paid their loan off in full. That is a good mark.
Like Jeff says- it all depends!
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I work with a lot of people who have had a hard time with their short sales and they have to stop paying the mortgage for the banks to work with them.
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I think that is something that the banks try to convince us agents of but I have rarely seen this, out of the 41 short sales that I did last year, more than 1/2 were current on their mortgage and most of those were investors and not owner occupied. Alot of it depends on the investor on the loan though.
Paula Evans said:I work with a lot of people who have had a hard time with their short sales and they have to stop paying the mortgage for the banks to work with them.
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That's great to hear. I work primarily with homeowners living in the home and can't afford the payments.
Jeff Payne said:I think that is something that the banks try to convince us agents of but I have rarely seen this, out of the 41 short sales that I did last year, more than 1/2 were current on their mortgage and most of those were investors and not owner occupied. Alot of it depends on the investor on the loan though.
Paula Evans said:I work with a lot of people who have had a hard time with their short sales and they have to stop paying the mortgage for the banks to work with them.
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Permalink Reply by R Mial on
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My husband and I just did a ss w/Suntrust in 03/2010. Suntrust reported our account as settled and we didn't have any impact on our scores. In fact our scores actually went up and we both had 825 after they closed our account. We had never missed any payments and we were never late regardless of how hard of a struggle it was to get the mortgage paid. DON'T LISTEN TO ANYONE IF THEY TELL YOU NOT TO PAY YOUR MORTGAGE OR JUST PAY IT LATE!!! You wouldn't believe how many experts advised us to just not pay our mortgage. We begged, borrowed and sacrificed everything to get the payments made and now we have just been pre-approved for another mortgage and we are buying another house! it sounds almost impossible and not many people could advise us because our situation is rare as we hadn't missed or been late with any payments. It can be done but you have to be convincing with your hardship letter and you must be able to communicate to the bank the severity of your situation.
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Permalink Reply by Anna Boyd on
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I've been told that credit agencies report up to 90 day late. So a person can miss a year and it shows as a 90 day late - which is still a decent hit. Also, from what I've seen of people's credit scores after a short sale or a BK is that a lot depends on length of prior good credit. If everything was peachy for 20 years until a hardship occurred and there were multiple accounts paid as agreed, it would explain the wide swings on how it affects someone's credit.
Katerina Gasset said:We have plenty of sellers who after a short sale their credit scores actually went up. We have those who have such terrible scores because they did not make a mortgage payment for over 2 or 3 years. Going 120 days late drops your credit score to foreclosure levels so the homeowner is going to take a bad hit in being so late.
But we have plenty of homeowners who did not go late on their payments and got a short sale and it only shows on their credit report that they paid their loan off in full. That is a good mark.
Like Jeff says- it all depends!
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