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Permalink Reply by Jeff Payne on August 4, 2011 at 2:16am

I have a seller who fits your description.  His credit score dropped 25 points.  He has not tried to purchase a home since then.

Another seller who had a short sale almost 2 years ago is able to get a mortgage at the 2 year mark according to his lender.

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Permalink Reply by Andrew Coppo on August 4, 2011 at 3:10am

From MyFico.com

 

The common alternatives to foreclosure, such as short sales, and deeds-in-lieu of foreclosure are all "not paid as agreed" accounts, and considered the same by your FICO® score. This is not to say that these may not be better options for you from a financial perspective, just that they will be considered no better or worse for your FICO score.

 

See also a blog post I wrote on the topic: http://closingtableblog.com/2011/04/how-does-a-short-sale-affect-yo...

 

If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact to your FICO score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have a greater negative impact on your FICO score.

 

With regard to getting a loan, under current lending requirements, most individuals qualify for financing 2-4 years after a short sale and 3-7 years following a foreclosure, both are subject to extenuating circumstances. 

 

I hope this helps. 

 

Andrew 

Greater Boston Short Sales, LLC

www.closingtableblog.com

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Permalink Reply by Wendy Rulnick on August 4, 2011 at 3:11am

David - It depends on your personal credit scenario. Studies have shown that credit drops more if the original credit score is higher, unfortunately.  You may be able to get a loan immediately, if there was no judgment (deficiency) depending on the new mortgage investor. 

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Permalink Reply by Bryant Tutas on August 7, 2011 at 12:33am

Putting this in the newsletter today

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Permalink Reply by James Lockard on August 7, 2011 at 3:03am

I actually had one seller's credit score go up! Score was 663 in February, we closed on his short sale in April, and in June his score was 770. This is counter intuitive but must be because outstanding debts were reduced.
 

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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on August 7, 2011 at 8:29am

I've had them all over the place.  One client was not late on anything - mortgage, credit cards, car payments, etc.  Short Sale on house caused a 150 point drop on FICO.  I had another one, no mortgage payments for 4 months, everything else perfect - FICO dropped only 50 points.  Another, house went to foreclosure but everything else was perfect, no change in FICO. 

 

In many of these cases, it has to do with more than the mortgage.  If Credit Card balances are 80 - 90% of their limit and they have mortgage issues, their FICOs will drop significantly.

 

I've attached a document provided by one of our local Title Companies describing the effects of a Short Sale on Credit.

Attachments:

• EFFECTS.doc, 785 KB

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Permalink Reply by Karyn samuel on August 7, 2011 at 4:51pm

I had a seller that fits this bill, who had very good credit, never missed a payment, did a short sale and had no PM and WF waived the DJ.  The credit score went down 70 points.  They were able to finance a home purchase only using an FHA type of product almost immediately after the SS took place.  IF they wanted to finance going conventional, they have to wait two years from the date of the SS.

 

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Permalink Reply by Kimberley Kelly on August 8, 2011 at 2:13am

I think the all over the map scenario would be the best to believe.  Remember, our Credit Rating System is probably no more "guided" than the Short Sale process..Agree with Karyn here..If you have a good down payment, probably get a loan much quicker than you may think..

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Permalink Reply by Mike Ashcraft on August 8, 2011 at 4:57am

I have been told there are new loan programs for people that have done a Short Sale and they are able to get loans within months after closing the Short Sale.  The qualifier to that is they have to not have had a NOD issued.

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Permalink Reply by Jason Boykin on August 11, 2011 at 6:48am

I have concrete evidence because I signed up for a credit monitoring service.  I had two loans, both were short and never late.  The first one reported 15 days after the sale and my FICO dropped 5 points. The second one was 3 days later and my score did not drop at all.

 

The funny thing was that both companies did 'hard inquiries' during their approval processes.  These hurt my score about 7 points each, more than the negative report.

 

I'm buying a new home now, less than 60 days later and I'm already approved for the loan.

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Permalink Reply by Steven Angelil on October 31, 2012 at 5:00am

I have a very similar situation and was hoping to find some recent posts on this.  I had a nice conversation with a young man who moved from FL to SC, is current on both his first w/ ING Direct and his HELOC w/ Regions Bank.  Breaking even/losing a little w/ his tenants.  No plans to return to FL.  Already purchased a home in SC but only real concern is the hit to his credit score.  I want to send him some info on this but not sure on what to send.  Any Superstars w/ suggestions on how to capture this listing by overcoming the credit objection??  Thanks in advance!

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Permalink Reply by Jeff Payne on October 31, 2012 at 5:26am

First thing I would explain to them is that credit does not define a person.  There are good people with bad credit and bad people with good credit.  As far as credit scores, I have past short sale customers who did a short sale without missing a payment and their credit is stellar.  Have some who missed payments and their credit is damaged.  have not talked to any yet that have significantly reduced scores when doing a short sale without missing payments.  One particular sellers credit report has NOTHING about a short sale on it.

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