Will A Short Sale Hurt Your Credit, And Will You Even Qualify For One?

There is a smarter way to approach short sale hurt credit, and it starts with knowing a few key details. This guide covers them, along with tips you can apply immediately.

Key Takeaways

• Plenty of people are finding themselves underwater in their homes, owing more on the homes than they’re currently worth.
• People have seen their home values drop by tens of thousands of dollars, if not hundreds of thousands.
• In the area that we live in the story hasn’t been much different.
• Worth noting: there have been plenty of foreclosures and home values have dropped significantly.

Tips That Make a Difference

SharePinTweet26Share127 SharesOne aspect we’ve heard a lot about the last couple of years is the rash of foreclosures and short sales, and how the real estate market is experiencing a massive downturn. We bought our house near the height of the housing bubble, and over the past 5-6 years we’ve watched as our home value has dropped by more than $70-80,000 dollars.

• I don’t have to tell you that it hurts to watch your equity disappear into thin air like that.
• Over the past year or so we’ve been thinking about upgrading our house a bit, in part since we’re hoping to have more children some day, and wish to have more space, and a backyard for them to play in.
• More importantly, we also figured now would be a pretty decent time to purchase with the home values being so low.

Common Mistakes to Avoid

We’ve been able to find some properties that we’d like, and we’ve strongly been considering building our own home since my in-laws are builders. Quick Navigation ToggleOwing More Than Your Home Is Worth How Does A Short Sale Work?

• Should You Do A Short Sale?
• Remember that consequences Of Doing A Short Sale Owing More Than Your Home Is Worth Our only problem?
• Despite the fact that we’ve paid off almost $80,000 of our mortgage, we’re not sure we can sell our house for more than what we owe on the property.

Is Short Sale Hurt Credit Worth It?

The values have just dropped too much.  We’ve also looked at sales of similar homes, and they’re selling for an additional $30-40,000 less than we thought our home was worth. My wife’s mom, while discussing the topic, suggested that the solution was to do a short sale, and then begin over and purchase a new house.

• As a rule, i don’t think my mother-in-law or wife are aware of just how a short sale works, or that there are significant downsides to doing one.
• How Does A Short Sale Work?
• In other words you have to contact them and reveal them that there is a solid reason for doing  a short sale.  You also have to reveal them that you are truly having a  financial hardship.  Then they will make a decision as to whether they’ll allow a short sale.

Where the Real Savings Hide

Luckily, if you’re considering doing a short sale, some banks are now even offering short sale incentives to some people to go through with a short sale instead of a foreclosure. In short, should You Do A Short Sale?

• So the question is, do you genuinely wish to do a short sale?  Will your situation even qualify for a short sale?
• Some reasons that may NOT qualify for a short sale: Wanting to purchase another home:  The lender won’t care if you wish to move to a different location or bigger home.
• Pregnancy: Having the size of your family increase or expenses increase are not qualifying hardships.

A Closer Look at Short Sale Hurt Credit

Worth noting: spending all  your money on electronics: Having irresponsible spending habits will not qualify you. Bad neighbors:  You may have found that all your neighbors are drug dealers, but this won’t qualify you to do a short sale.

• Some reasons that might qualify for a short sale: Unemployment: If you lose a job and your source of income, that may be a qualifying hardship.
• Bankruptcy: Having a bankruptcy could be a qualifying hardship since you probably don’t have the money to pay your mortgage.
• More importantly, death:  Having one of the spouses die could qualify you.

What to Know About Short Sale Hurt Credit

Divorce: Having a divorce and a resulting loss of dual incomes or other expenses could qualify you. Health problems:  Having health problems that lead to financial hardship, that could qualify.

• The point here is that you have to be able to reveal some legitimate source of financial hardship that precludes you from making full payment on your loan.  So if you just wish to get a bigger house with a nice fenced in yard, that is not a solid reason to be doing a short sale.
• Remember that consequences Of Doing A Short Sale So even if you qualify for a short sale, what are some of the consequences of going through with one?   Will it put a blemish on your credit report?  Is it better than  walking away and going through foreclosure?
• You may not be able to get another home loan: If you’ve had a foreclosure or short sale you may not be able to get another Fannie Mae or Freddie Mac backed loan.  You’ll have to wait at least 2 years to get another loan with a short sale, and  5 years with a foreclosure.

How Short Sale Hurt Credit Really Works

So if you thought that there were advantages to a short sale over a foreclosure when it comes to preserving your credit, most sources that I’ve read say that genuinely isn’t the case. They both affect your credit about equally.

• As a rule, for us, we’re definitely not going to be going down the road of a short sale as we can afford to make the payments, we don’t have any hardship and I don’t wish the ding to our credit.
• That plus we’d require to get another home loan right away if we sold.   So I guess we’ll just have to wait until we can sell it for what we require, or save up the difference.
• Have you considered doing a short sale, or going into foreclosure?  After knowing the consequences, would you still attempt to do one?

Getting the Most From Short Sale Hurt Credit

Will You Have To Pay Taxes On Forgiven Mortgage Debt Or.

Frequently Asked Questions

How can I save money on short sale hurt credit?

Compare prices across a few retailers, look for active coupon codes, and time bigger buys around sales events. We bought our house near the height of the housing bubble, and over the past 5-6 years we’ve watched as our home value has dropped by more than $70-80,000 dollars.

Is it worth shopping around for short sale hurt credit?

Usually yes. I don’t have to tell you that it hurts to watch your equity disappear into thin air like that.

What should I check before buying?

Read the terms, confirm any code still works, and factor in shipping or returns. Over the past year or so we’ve been thinking about upgrading our house a bit, in part since we’re hoping to have more children some day, and wish to have more space, and a backyard for them to play in.

Smart Ways to Save More on Short Sale Hurt Credit

• Compare the final price including shipping, not just the headline number.
• Check for student, military, or first order offers you may qualify for.
• Time non urgent purchases around major sale events for the deepest cuts.
• Leave items in your cart for a day; some stores send a follow up discount.
• Pair cashback with a coupon so you save twice on the same order.

Final Thoughts

The bottom line on short sale hurt credit: a little research goes a long way. Compare your options, watch for seasonal offers, and never pay full price when a better deal is a click away.

Originally published at biblemoneymatters.com.