What’s the difference between a short sale and a foreclosure?
How a Short Sale Affects your Credit
The short sale will only affect your score by 30–50 points on average. The late payments are what cause your credit score to plummet. Each missed payment can lower your credit score by 30+ points. A short sale is a SALE and in many cases shows up on your credit report as lien satisfied or paid in full.
In the real world, unless you pay cash for everything, your credit score is the most important asset you have. Once a foreclosure damages your credit, usually to the tune of 200–300 points, it will take a long time to fix. A foreclosure is not a sale it is a REPOSSESSION, adversely affecting your credit for a minimum of five years and remains on your credit history for 7 to 10 years and on public record indefinitely.
Since a short sale shows up as a sale, it should not affect your present or future employment. A foreclosure however can affect your employment. If your employer requires fiscal responsibility, your current or future employment may be in jeopardy. Currently, there are no laws protecting you from being terminated or discriminated against due to your foreclosure.
Since your credit has been damaged far less than it would have been due to a foreclosure, the prospects of a conventional loan in the near future are much more obtainable through credit repair. The standard loan application form 1003 requires you to disclose any foreclosures dating back for the last 7 years, which will drastically affect the interest rate you will receive if you even qualify for a loan.
New FHA guidelines allow you to apply for a new FHA loan just 2 years after a short sale. With a foreclosure on your record, you could be ineligible for a FHA loan for a minimum of 5 years. That is…if you even qualify for a loan.
A lien holder can actively seek a deficiency judgment and garnish wages to get back any money owed. Instead of “walking away,” a foreclosure may be the beginning of greater problems. A short sale expert, using advanced negotiation techniques, can obtain a short sale approval with no deficiency and a paid in full status.
Because you have shown initiative by keeping in constant contact with your lenders, you stand a far better chance of retaining your security clearance. It is also beneficial to let your chain of command know about your financial situation. This transparency will help during the reinvestigation of your security clearance. If the (re)investigation shows a foreclosure it could cost you your security clearance.