Foreclosure vs. Short Sale: Homeowner Consequences

Future Fannie May Loans on Primary Residence: Losing a home to foreclosure makes you ineligible for a Fannie Mae backed loan for a period of five years.  A successfully negotiated and closed short sale allows you to be eligible for a Fannie Mae backed mortgage after only two years.

Credit Score: Losing a home to foreclosure may lower your credit score anywhere from 250 -350 points, effecting your score for over three years.  A successful negotiated and closed short sale should show your mortgage as paid or negotiated.  Late mortgage payments lower you score as little as 50 points, other late payments will affect your credit score also.  A short sale’s affect can be as brief as 12 – 18 months.

Credit History:  A foreclosure will remain as public record on a person’s credit history for 10 years or more.  A short sale is not reported on a credit history.  The loan is typically reported as “paid in full, settled”.

There are many important differences in how foreclosures and short sales affect a homeowner’s ability to move on from a difficult situation: security clearances, current and future employment and deficiency judgments, to name a few.  Contact Leslie Jones, lv.jones@comcast.net for more information.

This information is provided by Leslie Jones, CDPE and the Distressed Property Institute.  Affects of foreclosure and short sale will vary with individual financial situations.