When compared to other options, such as foreclosure and bankruptcy, a short sale has a substantially better impact on a credit report. Though short selling your home will not improve your credit and certainly won't look good on there, it will help you keep your head above water and will not destroy you for the long run.
Direct Impact on FICO Score
While people who have their homes foreclosed could see their credit score dip by 300 points, people who short sell their homes are looking at a loss of 80 to 100 points, at the most. This is because you are still giving the lenders something and in the end, you are showing the responsibility that lenders value.
How Long Will I Have to Wait to Buy Another Home? This is another area where short sellers benefit over their foreclosed counterparts. The waiting time for purchasing another home when you short sell is much shorter than the other options. In around 19 months, you can purchase another home at a decent interest rate. That means that you could conceivably be back on your feet in no time, establishing a new credit history.
Short Sale Deficiency Judgments
Not everything is positive when it comes to short sales, though. A seller could end up having to face a deficiency judgment, depending upon their home state. This payment could be as much as the full difference of the total loan amount and the amount that you pay.
The laws on these judgments vary depending upon where you live, so it is important to review these laws in order to know what you might have in store. If you are held responsible for the repayment of such a loan, then short selling might not be a great option.
It will also be up to your lender to determine whether or not a deficiency judgment is in the cards. Because of this, having a discussion with your lender can often help you figure out what might be in store. A real estate attorney might also have some insight on this issue.
The short sale option is good if you have no other options, but make sure that it is going to turnout to be a win win situation and you can also call a Real Estate agent help negotiate the deal with the bank and yourself. Wish you luck in your short sale experience.
Do you want your credit score to plummet, go ahead and co-sign for someone. I personally believe this is a huge problem. With your credit score and credit report being the roadmap to financial health, the question is can you really afford to co-sign for friends and family. Over the years I have seen more problems with this issue. Here is how a co-signer can affect your personal credit.
Late Payments If you co-sign for a family member your credit report could be at risk. If for some reason the family member is late on an obligation you co-signed for your credit score just dropped about 100 points. Most people don't thing about this, but it happens all the time. Anytime someone is late on a obligation that reports to all 3 credit bureaus, that bad mark will be on there for 7 years. It's not worth it. If you have to co-sign for someone make sure you are not getting ready to make a big purchase, because it could affect your purchasing power as well. Some banks like to see a payment history in good standing usually around 12 months on co-signed obligations. They also typically like to see proof that the payment is coming out of the person's bank account you co-signed for. So co-signing opens up all kinds of worms in the world of finance.
Income to Debt Ratio Once you have co-signed on a loan for a friend or family member it could affect your ability to get a loan for something else. That added debt that is showing up on your credit report is technically your responsibility as well. Let's assume you have this car note you co-signed for and the payment is $500.00 a month. You have now added this debt to your portfolio of debts in a underwriters eyes. In order to buy something else an underwriter may require a good 12 month payment history by the other party to disallow a debt from your portfolio of obligations. So with this being said think real hard before you co-sign on anything. I don't recommend it. There are ways for someone to get there credit established so they can get loans in there own name. The internet is a great resource. There is anything you can imagine on the web to help you achieve just about anything, including getting your own credit established so you don't need a co-signer.
Both Scott English & Mike Clover are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Scott English has sinced written about articles on various topics from Modelling, Medicine and Education. Scott English. Full time Licensed Agent in South Florida . Specializes in Waterfront properties,Rentals, relocation, New Construction, condominiums. Any and all Real Estate needs. Visit. Scott English's top article generates over 4400 views. to your Favourites.