Before you jump to the conclusion that a foreclosure is your only option, or the easiest/quickest way out of a difficult and stressful financial situation...think again! Here's #1-5. Check back for #6-10! A short sale (short sales allow a homeowner with a legitimate hardship to sell their property for less than the balance of their mortgages) can be a viable alternative to foreclosure and one that bears serious consideration. Consumers often don't realize that the ramifications of a foreclosure are very different than those of a short-sale.
Reason # 1 - Future Fannie Mae Loan - Primary & Non-Primary Residence
A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of five years vs. a homeowner who negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage for a primary residence after two years. An investor who allows a property to go to foreclosure is ineligible for a Fannie Mae backed investment mortgage for seven years vs. an investor who successfully negotiates a short sale will be eligible for a Fannie Mae backed investment mortgage after only two years.
Reason #2 - Future loan with any mortgage company
On any future 1003 application, a prospective borrower will have to answer YES to the question "Have you had property foreclosed upon or given title or deed in lieu thereof in the last seven years?" - this will affect future rates. There is no similar declaration or question regarding a short sale.
Reason #3 - Credit Score
In a foreclosure scenario the homeowners credit score may be lowered anywhere from 250 to 300 points - typically affecting the score for over three years. In a short-sale situation only the late payments on the mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the credit score as little as 50 points if all other payments are being made. The effect of a short sale can be as brief as 12 or 18 months.
Reason #4 Credit History
A foreclosure will remain as a public record on a person's credit history for 10 years or more. Whereas, a short sale is not reported on a credit history. The loan is typically reported as "paid in full, settled."
Reason # 5 Security Clearances
Outside of a conviction for a serious misdemeanor or felony, a foreclosure is the most challenging issues against a security clearance. In almost all cases, if a homeowner has a foreclosure and is a police officer, is in the military, CIA or any other position that requires a security clearance the clearance will be revoked and their position will be terminated. A short sale on its own does not challenge most security clearances.
"How to Buy Short Sales & Avoid Foreclosure" free seminar Oct. 27th at UCI University Club - 801 E. Peltason Irvine. 6:30pm - 8pm.
View the latest Orange County luxury real estate news at the Canaday Group blog.
Showing posts with label credit history. Show all posts
Showing posts with label credit history. Show all posts
Tuesday, October 13, 2009
Thursday, March 19, 2009
Short Sale vs. Foreclosure & Your Employment
How will a Short Sale vs. Foreclosure affect your Current Employment & Future Employment? Here are the answers:
Current Employment
Foreclosure-Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination
Successful Short Sale-A short sale is not reported on a credit report and is therefore not a challenge to employment.
Future Employment
Foreclosure-Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.
Successful Short Sale-A short sale is not reported on a credit report and is therefore not a challenge to employment.
Current Employment
Foreclosure-Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediate reassignment or termination
Successful Short Sale-A short sale is not reported on a credit report and is therefore not a challenge to employment.
Future Employment
Foreclosure-Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.
Successful Short Sale-A short sale is not reported on a credit report and is therefore not a challenge to employment.
Friday, March 06, 2009
Foreclosure vs. Successful Short Sale
We would like to share some tips on how the short sale route is much better than foreclosure. The Canaday Group mortgage counseling department is here for you and will review your options, please call us.
Credit Score
Foreclosure-Did you know that your credit score may be lowered anywhere from 250 to over 300 points? Typically will affect score for over 3 years.
Successful 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. A short sale's affect can be as brief as 12 to 18 months.
Credit History
Foreclosure- Foreclosure will remain as a public record on a person's credit history for 10 years or more.
Successful Short Sale- Short sale is not reported on a credit history. There is no specific reporting item for 'short sale'. The loan is typically reported 'paid in full, settled'.
Attend our Avoid Foreclosure Seminar on March 11th 7pm at Tijeras Creek Golf Club in Rancho Santa Margarita.
Credit Score
Foreclosure-Did you know that your credit score may be lowered anywhere from 250 to over 300 points? Typically will affect score for over 3 years.
Successful 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. A short sale's affect can be as brief as 12 to 18 months.
Credit History
Foreclosure- Foreclosure will remain as a public record on a person's credit history for 10 years or more.
Successful Short Sale- Short sale is not reported on a credit history. There is no specific reporting item for 'short sale'. The loan is typically reported 'paid in full, settled'.
Attend our Avoid Foreclosure Seminar on March 11th 7pm at Tijeras Creek Golf Club in Rancho Santa Margarita.
Tuesday, January 13, 2009
Credit Tips...part 2
A few more credit tips for you!
3. The Age of Your Credit History -
The score is looking to see if you have a lengthy history of managing your credit obligations. The age of your credit history is determined by the "date opened" on the oldest account listed on your credit report. The older your credit report, the more points you will earn in this category. You should never try and get old, good accounts removed from your credit reports. You want the history!
4. New Credit/Inquiries
When you apply for credit you are giving the lender permission to pull your credit reports and credit scores. Each time this happens, your credit report will reflect what's called an "inquiry." To perform well in this category, you should really only apply for credit when you need it.
5. Credit Mix
You should have a nice diverse list of different types of accounts in your credit report. This includes mortgages, auto loans, installment loans, credit cards, etc.
That pretty much covers the factors that are used in determining your credit scores. Let's do a quick recap:
1. How you pay your bills - on time is good, late is bad
2. How much you owe your creditors
3. How long you've had credit - the longer the better
4. How often you apply for credit - apply only when you really need it
5. Account mix - diversity is good
If you can stick by these five key principles, you should be
well on your way to healthy credit and credit scores.
3. The Age of Your Credit History -
The score is looking to see if you have a lengthy history of managing your credit obligations. The age of your credit history is determined by the "date opened" on the oldest account listed on your credit report. The older your credit report, the more points you will earn in this category. You should never try and get old, good accounts removed from your credit reports. You want the history!
4. New Credit/Inquiries
When you apply for credit you are giving the lender permission to pull your credit reports and credit scores. Each time this happens, your credit report will reflect what's called an "inquiry." To perform well in this category, you should really only apply for credit when you need it.
5. Credit Mix
You should have a nice diverse list of different types of accounts in your credit report. This includes mortgages, auto loans, installment loans, credit cards, etc.
That pretty much covers the factors that are used in determining your credit scores. Let's do a quick recap:
1. How you pay your bills - on time is good, late is bad
2. How much you owe your creditors
3. How long you've had credit - the longer the better
4. How often you apply for credit - apply only when you really need it
5. Account mix - diversity is good
If you can stick by these five key principles, you should be
well on your way to healthy credit and credit scores.
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