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Real estate, homes for sale, and relocation in North Metro Denver, Coloradoincluding Denver, Brighton, Thornton, Westminster, Broomfield, and NorthglennThe Sold Team - Your North Metro Real Estate Experts |
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Real estate, homes for sale, and relocation in North Metro Denver, Coloradoincluding Denver, Brighton, Thornton, Westminster, Broomfield, and NorthglennThe Sold Team - Your North Metro Real Estate Experts |
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Metro Denver, Colorado Short Sales Versus Foreclosures - Comparing the Effects |
|
Issue or Topic |
Effect of Foreclosure |
Effect of Completed Short Sale |
| Applying for a Loan for a Primary Residence through Fannie Mae | If your home is foreclosed upon, you aren't eligible for a mortgage loan backed by Fannie Mae for five years. | If you successfully complete a short sale, you're eligible for a mortgage loan backed by Fannie Mae after two years. |
| Applying for a Loan for a Non-Primary Residence (such as a second home or rental) through Fannie Mae. Also referred to as an Investment Mortgage. | If you allow a home to be foreclosed upon, you aren't eligible for an investment mortgage backed by Fannie Mae for seven years. | If you successfully complete a short sale, you're eligible for an investment mortgage backed by Fannie Mae after two years. |
| Applying for a mortgage loan from any lender | When applying for a mortgage loan, if your home has been foreclosed upon, you will have to answer YES when you're asked if you've had a foreclosure. This applies for 7 years, and affects mortgage rates. | The standard mortgage application doesn't ask about short sales. |
| Your Credit Score | Having your home foreclosed upon lowers your credit score approximately 250 - 300+ points. This will usually affect your credit score for three years or more. |
If you complete a short sale, only
late mortgage payments will
show. The
mortgage itself will show as paid or negotiated. If you're up to date on other payments, your credit score will be lowered as little as 50 points. Also, the effect on your credit score may only last 12 - 18 months. |
| Your Credit History | A foreclosure remains on your credit history for 10 years or longer. | A short sale is not reported on your credit history. The mortgage will usually be shown as settled or paid in full. |
| Security Clearances |
A foreclosure can have a serious
affect on your ability to
get or maintain a security clearance. If your job requires a security clearance, a foreclosure could result in your being transferred to another position or even losing your job. |
A short sale does not affect most security clearances. |
| Your Current Employment | Employers have the right to check the credit of all employees in sensitive positions. Many employers do check regularly. A foreclosure may be grounds for immediate transfer to a different job or even termination. | A short sale is not reported on a credit report, so it does not affect your current employment. |
| Your Future Employment | Employers often require credit checks on job applicants. A foreclosure is one of the most damaging items you can have on your credit report. It may be prevent you from getting the job. | A short sale is not reported on a credit report, so it does not affect your future employment. |
| Deficiency Judgment | In a Colorado foreclosure, the lender has a legal right to pursue a deficiency judgment against you. | In a successful short sale, the lender may agree to give up the right to pursue a deficiency judgment against you. |
| Amount of Deficiency Judgment |
In a Colorado foreclosure, your
foreclosed-upon home is offered for sale at a Public
Trustee’s Sale. If the home doesn’t sell, it
will have to be sold by the lender through the REO
process. In this economy, most foreclosed-upon homes are sold as REO’s. This usually results in a lower sales price and longer time to sell the home. That means the lender makes less money and has higher expenses to sell the home. It also means a higher possible deficiency judgment against you. |
In a successful short sale, your home
is sold at a price that should be close to market
value. Almost always, the sale price will be higher
than the home would have sold for through a REO
sale. This means a lower deficiency judgment against you, or even forgiveness of the remaining deficiency. |
Disclaimer: For informational purposes only. We are not lawyers and are not qualified to give legal advice.
Real estate, homes for sale, home searches, and relocation in Metro Denver, Colorado, including Denver, Brighton, Thornton, Westminster, Broomfield, and Northglenn. Copyright 1999-2011 Dave Babb. All rights reserved.
