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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.
Hi gene,

If you take the rights steps, you won't take much time to improve your credit score. You can check out the given page in order to know some steps to improve your score:
http://www.mortgagefit.com/credit-rating/credit-repair.html

Thanks
Posted on: 06th Nov, 2010 12:25 am
I am in Chap 13 currently. I have 3 payments left ($570) to pay to be finished. I got married in April 2010. I have a mortgage in my name alone and my house has been forsale since April with no offers and very few lookers. The houses in my neighborhood are going for $20-$50 K and I owe $62K for my house. It sits empty. Dont want to rent as this could affect me more negatively buy getting bad renters. We currently live in my husbands family owned home and are considering buying it from his parents. I am current on my payments but its becoming a struggle to maintain two houses. My credit it is already a mess. Should I do a short sale to get out from under this payment? How will it affect my taxes? And I believe my husband could get approved for a loan in just his name to buy this house. Would that work? What are my options and what would be best and affect me the least negatively.
Posted on: 22nd Nov, 2010 09:49 am
Posted on: 23rd Nov, 2010 12:02 am
We're underwater about $35k, never a late payment, and asking for a short-sale due to moving out of state. The bank wants 1/2 of what we owe as a promissory note (0%) to accept the short sale over a period of years. Will this STILL affect our credit? Should we get a letter from them stating they'll NEVER come after our 401k or savings, etc. as long as we make timely payments on the promissory note?
Posted on: 01st Dec, 2010 02:46 pm
Hi SometimesLucky!

Welcome to forums!

Your query has been replied to in the given page:
http://www.mortgagefit.com/problems/shortsale-note-default.html

Take a look at it. Hope it helps you.

Sussane
Posted on: 02nd Dec, 2010 02:11 am
should I stop my mortgage mayment in order to go short sale
Posted on: 10th Jan, 2011 09:19 am
Hi moe!

Welcome to forums!

Deliberately stopping mortgage payments won't be of much help to you. Unless you have genuine financial hardship, the lender will not consider your request for a short sale.

Feel free to ask if you've further queries.

Sussane
Posted on: 11th Jan, 2011 12:13 am
Hi - My boyfriend and I bought a house in 2006, and broke up 3 years ago. We both want out of the house ASAP but are about 80K upside down from what we bought at to what it is now worth. He mentioned filing Chapter 13 (bankruptcy) and I keep thinking Short Sale is the way to go. We are current on payments, never late, and have a renter but we still each pay an amount each month to cover the mortgage. Can you please give me insight on what is the best route for us? We don want to mess our credit up, but not too sure there is a way out of it. Thank you so much for any advice!
Posted on: 11th Jan, 2011 11:34 am
welcome stephanie,

rather than filing bankruptcy, it will be a better option to go for a short sale. the credit score will be less affected but you'll be liable for paying off the deficient balance resulting from the property sale.
Posted on: 11th Jan, 2011 09:24 pm
My mother recently passed and Chase has the house in active foreclosure. The foreclosure dept contacted me this evening to discuss a short sale. The mortgage balance is 16,227.00 with a -7,800.00 in escrow. They offered me 10,000.00 to list and short sell the house. Told me that they would pick up all the costs including the commission to the real estate agent. Market analysis on the property is 35,000.00. Would it be better to let them foreclose and see what it sells for in a sheriff's sale and redeem it after or short sell it for a guaranteed 10,000.00? Are there any other options?
Posted on: 20th Jan, 2011 08:29 pm
Welcome Debi,

If your state laws offer redemption, then only you will get the option to get back the property. If your state laws don't have redemption criteria, the lender will not offer you that option.
Posted on: 20th Jan, 2011 11:50 pm
I sold my home after the seriff sale how will show up on my credit report I paid the loan in full and am square with the morgage company, how bad will this effect us?
Posted on: 26th Jan, 2011 06:13 pm
Hi Guest!

Welcome to forums!

If your property went through a foreclosure, then it will be mentioned in your credit report and your score will go down by 250 points though you paid off the mortgage in full.

Feel free to ask if you've further queries.

Sussane
Posted on: 27th Jan, 2011 12:08 am
we are upside down on our CA property- purchased for $850K, now worth $700K. considering short sale, but two concerns- 1. you state we need to be delinquint on our mortgage payments, we have always paid on time and 2. We do have approx $100K in the bank and I have a reasonalbe income, but husband not working (and we own another rental that is underwater as well). Will this automatically make the bank not approve short sale? any way to increase our chances? thank you!
Posted on: 27th Apr, 2011 04:37 pm
we are upside down on our CA property- purchased for $850K, now worth $700K. considering short sale, but two concerns- 1. you state we need to be delinquint on our mortgage payments, we have always paid on time and 2. We do have approx $100K in the bank and I have a reasonalbe income, but husband not working (and we own another rental that is underwater as well). Will this automatically make the bank not approve short sale? any way to increase our chances? thank you!
Posted on: 27th Apr, 2011 04:37 pm
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