With lots of questions regarding foreclosures and short sales, listed below are some of the homeowners consequences associated with having a foreclosure affect your credit versus a short sale.
Fannie Mae Loan - Primary Residence
- A homeowner who loses home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of five years.
- A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.
Fannie Mae Loan - Non-Primary
- An investor who allows property to go into Foreclosure is ineligible for Fannie Mae investment loan for 7 years, a successful short sale only 2 years.
Future Mortgage Loan
- Prospective borrower will have to answer YES to Have you had property forclosed upon or given title or deed in lieu thereof in last 7 years? This will affect your mortgage rate.
- There is no similar question regarding short sale.
Credit Score
- Foreclosure - Score may be lowered anywhere from 250-300 points. This will affect score for over 3 years.
- Short Sale - Only late payments on mortgage will show and after sale, mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points, if all other payments are being made. This period can last 12-18 months.
Credit History
- Foreclosure will remain on person's credit history for 10 years or more.
- Short sale is not reported on credit history. The loan is usually reported as paid in full or settled.
