Compare Mortgage Quotes

Refinance Rates for Today

Please enable JavaScript for the best experience.

In the mean time, check out our refinance rates!

Company Loan Type APR Est. Pmt.

Short Sale Affects Credit Score - how many points do you lose?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 29th Dec, 2005 11:49am
A Short sale is where the lender agrees to accept an offer for a house that is less than the amount owed on the mortgage. Short sales happen when the owner is behind or about to become behind on their mortgage and want to avoid foreclosure. Moreover, if the home is located in an area where home prices are on a decline, then it may be sold off for less at a price that isn't enough to cover the loan balance.

A short sale is less damaging to your credit score than a foreclosure. Your FICO score will drop by 75-100 points if you do a short sale, compared to 250 if you get a deed-in-lieu.

By attempting a short sale, the borrower can avoid foreclosure and a decrease on their credit score. Moreover, a short sale may be faster and less expensive compared to foreclosure.

How to negotiate for short sale..

In most cases, borrowers are approved for the sale only after they have been in default and the lender has served them with a Notice of Default. At times, the borrower has the option to negotiate a short sale in case he's unable to pay off the loan and intends to move out. In this case, the borrower should provide the lender with a hardship letter stating why he cannot continue to pay his mortgage and why a short sale is the best option for both parties. It's better to take help of a real estate agent or attorney to negotiate a pre-foreclosure sale with the lender's Loss Mitigation Department.

Posted on: 29th Dec, 2005 11:49 am
My credit score is 550 and I am selling a house. I owe 50k and I am looking to do a short sale for 45k should. How does short sale affect credit score.
Chances are i'll be moving from Woodbridge.VA to Huntsville, AL within a year or so. I live paycheck to paycheck and the move would be a promotion plus a better quality of life due to the difference in cost of living. My debt to income ratio is over 43%. I'm making my monthly mortgage payments, have never been late, but i'm struggling. I have an upside down mortgage by aprox. $100K. My question;
Since i'm not behind on my mortgage payments, Is there another alternative to short sale? or another program you can suggest? Am i stuck with my current job and have to pass up this promotion oppurtunity because of the debt i'd be stuck with?

Thank you and I hope to here back from you,

Posted on: 08th Nov, 2008 06:07 pm
Hi Rodney!

You can place your existing property under rent. This will help you to keep the property and you will be able to pay off the mortgage with that payment. You can even request the lender and try to negotiate for a short sale. May be the lender will consider your case.


Posted on: 10th Nov, 2008 02:17 am
I purchased a house in 2005 for $240K, currently owe $220K and the value is now projected (based on area comps) at $140-150K. Renting is proving to be difficult and I am considering other options. I am current on all payments and have never missed a payment. Is a short sale an option for me considering I am not a foreclosure risk? If I do get a short sale will is destroy my credit - currently 768.

Posted on: 10th Dec, 2008 11:00 am
Hi Underwater mortgage!

Welcome to forums!

As you are current on your payments, the lender will not agree for a short sale. Lenders generally agree for a short sale only when you have defaulted on your payments. In case if you short sale the property, your credit score will be lowered by around 75-100 points.

However, you can list the property in the market and see if you are getting buyers or not. If you get buyers, you can sell off the property. But you should remember that the loan will become due immediately if you sell off the property.

Feel free to ask if you have further queries.

Posted on: 10th Dec, 2008 08:36 pm
Does any one make mortgage payment when the short sale is for approval with the lender.
Posted on: 06th Jan, 2009 05:36 pm
As far as I know, a lender approves a short sale only if you are delinquent on payments. So I don't think you need to pay the mortgage dues when you are waiting for a short sale approval from the lender.
Posted on: 06th Jan, 2009 11:00 pm
i have a 1st and a second mortgage, i owe about $252000, the house wa sjust appraised at $150,000. i can make the 1st mortgage payemnt but can't make the second, i was told by an agent to file the hardship and seek the short sale, my question is if the 1st mortgage accepts what happens with the second, will they just dismiss the balance or sick the sharks on me
Posted on: 12th Jan, 2009 05:10 pm
Hi guest

Though your first mortgage company accepts a short sale, you will still be responsible for the second mortgage. The second mortgage company will have all the rights to ask you to pay their dues. You can negotiate with them and check if they will forgive your second mortgage or not. If they do not forgive the debts and if you are unable to pay them, they may charge it off to a collection agency and you will have to pay the collection agency in turn.

Posted on: 13th Jan, 2009 12:41 am
I am current on my payments. My current FICO score is 744 However,I am in process of a short sale. What will be my expected credit score after the short sale? How can I resolve the credit damage with my bank? Finally, is it better to proceed with a short sale with attorney? The attorney fee is $3500. I have a great real estate agent. Thanks
Posted on: 29th Jan, 2009 07:21 pm
I was just wondering if you have to continue to make your mortgage payments while your house in in short sale?
Posted on: 30th Jan, 2009 09:01 am

To mrucl,

Credit score is lowered by around 75-100 points in a short sale. So, in my opinion, after short sale your credit score will be around 669 - 644. Once the short sale is over, you can then try to pay your other debts on time and you may even open some secured credit cards in order to improve credit. If you cannot negotiate with your lender, then you may take the help of an attorney otherwise you may negotiate with the lender yourself.

To hotshotjblaze,

If your short sale has already been accepted, then you will not need to pay your mortgage dues.

Posted on: 31st Jan, 2009 12:23 am
I am 57 have a house in Calif - a condo I used to live in Calif that is now a rented seasonal and loosing 10K a year in addition is under Loan Bal in value by 45 K, plus I own a house in Maine. Just lost my 10K month job - Have excellent credit - I can no longer make pymts on all 3 properties - I can make it if the condo goes. Next month the condo HP will not be paid, the other two properties will. Can I negotiate a short sale with the condo lendor? Since that property is in Calif can they sieze the little equity remaining in the other two properties I own.
Posted on: 05th Feb, 2009 08:56 pm

It depends on your California loans. If your loan is nonrecourse, then the only thing the lenders can do is go after that property.
Posted on: 06th Feb, 2009 09:22 am
We are selling our home right now for a short sale amounting to $240K. We got offer for $220K. We owe $240K in the first mortgage and $40K in the second mortgage. THe net sheet settlement for 1st mortgage is $197,00 and the second is $3,500. We got an approval in the first mortgage but we are still waiting for the second mortgage approval. On the first mortgage requirements we need to close after 30days of acceptance. Can we close in escrow the transaction without the second loan approval? what happen to the second mortgage? Anybody know the answer? Thank you.
Posted on: 19th Feb, 2009 06:15 pm
Hi Celia,

I suppose you wanted to say the your second lender has not approved your short sale request till now. As far as I know, you will have to wait and check if the second lender approves it or not. If the second lender does not approve it, then you will be liable to pay the mortgage dues to the second lender. If you don't, then the second lender can charge off the loan to a collection agency.

To know more about second mortgage charge off, check out the following link:
Posted on: 19th Feb, 2009 10:32 pm
Page loaded in 0.066 seconds.