I wanted to take the time to explain some of the consequences homeowners will face should they choose to walk away from their homes and allow the foreclosure. Its important that homeowners understand the options that can be utilized to minimize their loss while dealing with a foreclosure. Jennifer and I can educate homeowners facing foreclosure on the benefits of a Short Sale vs a Foreclosure, should that be an option to resolve your situation.If you are facing foreclosure your goal should be to resolve your financial situation, minimize your loss, limit the impact on your credit, understand and avoid (if applicable) any TAX ramifications and prepare yourself to purchase a home within your means.
Here are important issues you should consider before just walking away from your home. For many homeowners foreclosure is not the only option however most are to fearful to take the opportunity to explore solutions.
Jennifer and I have earned the Certified Distressed Property Expert Designation (CDPE), homeowners ensure that they are working with a real estate professional that is equipped to handle their specific needs. Call Jennifer and I at 661.290.3837 for a free consultation on loan modifications. We GUARANTEE we can teach you how to submit your own loan modification request. No Fees required.
These issues are worth considering when facing a foreclosure.
Issue Future Fannie Mae Loan - Primary Residence (effective May 21, 2008)
Foreclosure
A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.
A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.
Successful Short Sale
A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.
A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.
Issue
Future Fannie Mae Loan -Non Primary (effective May 21, 2008)
Future Fannie Mae Loan -Non Primary (effective May 21, 2008)
Foreclosure
An Investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years.
An Investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years.
Successful Short Sale
An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.
An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.
Issue
Future Loan with any Mortgage Company
Foreclosure
Future Loan with any Mortgage Company
Foreclosure
Future Loan with any Mortgage Company On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?" this will affect future rates.
Successful Short Sale
There is no similar declaration or question regarding a short sale.
There is no similar declaration or question regarding a short sale.
Issue
Credit Score
Credit Score
Foreclosure
Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over 3 years
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.
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.
Issue
Credit History
Credit History
Foreclosure
Foreclosure will remain as a public record on a person's credit history for 10 years or more.
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', "paid in full for less then full balance", "paid in full negotiated".
Bankruptcy (All except chapter 13) - 4 year time period from either the dismissal or discharge date of the bankruptcy action.
Bankruptcy/Chapter 13 - 2 years from the discharge date or 4 years from the dismissal date.
Deed-in-lieu of Foreclosure - 4-7 years following completion date, minimum 10% down.
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', "paid in full for less then full balance", "paid in full negotiated".
Bankruptcy (All except chapter 13) - 4 year time period from either the dismissal or discharge date of the bankruptcy action.
Bankruptcy/Chapter 13 - 2 years from the discharge date or 4 years from the dismissal date.
Deed-in-lieu of Foreclosure - 4-7 years following completion date, minimum 10% down.
Fannie Mae guidelines clearly show the advantage for a homeowner to short sale their home rather than suffer the consequences of a foreclosure. Please visit Fannie Mae's website for these guidelines. https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf
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