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Whether you are dealing or have dealt with a short sale, foreclosure, BK, delinquency on your mortgage payments, or have a number of late payments elsewhere, your credit score is damaged and your finances are most likely in lockstep. However, recovering with bad credit will be difficult as interest rates inflate the cost of living and affect various other facets of your life and naturally you get caught in a downward spiral of poverty.

The best example of this is a home mortgage. Do not even consider pushing for another home without rebuilding your credit prior. The figures below will show you why.

The Ding Of A Delinquent Payment, Short Sale, Foreclosure, and/or Bankruptcy

Take a look at the impact of each situation on your FICO score. As you can see, regardless which consumer type you are, you will have incurred a significant ding on your credit score.

Can You Obtain Credit?

There are great deals out there on the housing market but a big problem these days is the inability for homeowners to obtain credit to finance their home. Large agency investors such as Fannie Mae changed their minimum credit score requirement from 580 to 620. Anything under 620 is considered high risk. Your local bank may require a credit score of up to 660 or higher. The question is, even if you were able to qualify for a mortgage, should you finance with sub-par credit?

A Bad Credit Score Will Cost You!

These figures are based on rates from 9/12/11. The example below clearly shows you how much you will be affected from obtaining a mortgage without an outstanding credit score.

How Can I Quickly Rebuild My Credit Score?

Whatever situation you may be in, the longer you are stuck in a bad credit rut, the more exacerbated your financial situation may get. Here is how to prepare: If you have a low credit score and/or want to prepare your credit situation to qualify for excellent loans for your next home purchase, by the end of this article, talk to a Lexington Law credit specialist. I have personally researched and found them to be the absolute best company to work with in rebuilding credit scores. Here is a direct number provided through the short sale blog for a free consultation: 888-586-6113 or you can apply through their website.

Hope this helps!

Peter

Your Credit Score
When you foreclose on a home your credit will be altered for about 5+ years, to say the least. However, when you do a short sale your credit is also affected, but for a much shorter time period and less damage is done. The truth is there is no concrete answer as to how many points it will affect your score. Every person has his or her own FICO and each individual’s score will vary. What I can tell you is the late payments are typically what have the major affect on a borrower’s credit. Most people are usually able to qualify for a new loan and buy a new home within 2 years after a short sale vs. the 5+ years if you were to go into foreclosure. Since everyone is different it’s best to consult with a credit repair-person or your real estate professional in more detail.

FAQ’s
Why don’t I file Bankruptcy?
Short Sale vs. Bankruptcy – When faced with foreclosure many people tend to turn to bankruptcy as an option of solving their problem. Now there is a large difference many of the “professionals” fail to tell you. Filing for bankruptcy will consolidate your debt and can wipe out your liabilities, but it will not save you from having a FORECLOSURE put onto your credit report. Instead, now you will have both a bankruptcy and a foreclosure on your credit. If you plan on eventually turning back your property you WILL STILL HAVE A FORECLOSURE ON YOUR CREDIT REPORT. Trying to conduct a short sale while in bankruptcy can hold up the process, but it is not impossible. It will just take some more paperwork. My best advice is to consult with a great bankruptcy attorney prior to making any decision should you have additional debt you are unable to control besides your property. One key point to keep in mind is if your home is the only debt that is creating an uncontrollable situation for you then a short sale option is most likely your best bet vs. a bankruptcy. If you have other uncontrollable debt then a bankruptcy might also be needed in addition to a short sale. You should consult with a bankruptcy attorney should this be the case.

What do I do after a short sale?
After your short sale, the stress of your housing payment is extinguished and it’s time to get back on track to restoring your credit. Many people will rent for a while until their credit is fixed and then it’s time to get back into another house. With the right team of people working for you, you will be in a new house before you know it.

Mona Salem 310.925.4782 | Michelle Rosca 562.552.9600 | Long Beach Short Sales

Having problems with short selling property or a reverse mortgage in a probate?  Please contact us.

My client is doing a short sale on an investment property. Sales price is $175,000. The first mortgage, Citi, Is taking a short sale and allocating $4,500 towards the second mortgage which is 5th 3rd.

5th 3rd wants the entire remaining balance of $40,000 to be repaid by the seller. 5th 3rd wants the seller’s current 2^nd mortgage on the investment property to be transferred as a third mortgage on the seller’s personal residence. The seller may have maximum $5,000 to $10,000 equity in their personal residence, but not really if you factor in selling costs and closing costs.

5th 3rd demands, per some “policy”, to have the seller encumber his personal residence up to 140% of its value.

5th 3rd also disregards the seller’s financial statement. The financial statement shows about $2,000 monthly negative including the loans that are included in the short sale. After the short sale, the seller will be barely breaking even.

5th 3rd claims that according to his credit report he has $2,000 of discretionary income, even though the CREDIT REPORT DOES NOT REFLECT most of his expenses such as groceries, baby expenses (two babies), utilities and most of the expenses needed to run a household. 5th 3rd is plucking numbers out of air and is unwilling to explain their math.

The sellers refuse to jeopardize their personal residence and the roof over their babies’ head and are ready to pull the trigger on a chapter 7 bankruptcy to shake loose of the problem. They have spoken to a BK attorney who confirmed their chapter 7 eligibility. The BK attorney has sent a letter to 5th 3rd clarifying the situation.

5th 3rd also states they would rather get ZERO dollars in a foreclosure and bankruptcy rather than $4,500 now! Does 5th 3^rd get reimbursed more by TARP or other source if they get ZERO from the seller?

We have appealed and escalated to a manager, but 5th 3rd’s answer always comes back the same: FIRM DENIAL.

We now want to escalate as high as we can. Does the group have any experience, suggestions or contact info within 5th 3rd?

A similar situation was previously posted at http://shortsalesuperstars.com/group/fifththirdbank/forum/topics/lisa-i-am-in-the-same-boat-as . I have not been able to obtain the phone numbers that were offered in that previous post.

Any help would be greatly appreciated. I have not run into such a brick wall in the hundreds of liens I have negotiated.