How badly will your credit report be affected if you short sale your home? This is a concern for borrowers who need to get out from under their unaffordable mortgage, but do not want to ruin their hard earned credit rating. Up until very recently, the way a short sale would be reported could vary a great deal-there was no standard requirement that lenders had to follow.
New rules effective June 1, 2012 mandate that a short sale completed under the government program called HAFA be reported in two possible ways:
- Status 13-Paid or CLosed Account, Zero Balance
- Status 65-Account paid in full/foreclosure process started (this method applies IF a foreclosure was started)
New guidelines also make it possible to short sale your home even if you have NEVER been late on your mortgage payment, and this is another way that you can protect your credit rating. Under HAFA, you can short sale your home while being current on your mortgage, and have your credit report show as Status 13-Paid Account.
It is possible to purchase a new home immediately after closing your short sale, as long as your credit report shows the account as PAID or ClOSED-so it is important to make sure that your short sale is handled correctly and that your lender reports it according to the new guidelines.
There are many reasons to choose a short sale over a foreclosure, your credit rating is one of the most important. Other considerations are:
- Deficiency balance liability: HAFA eliminates all future liability for your forgiven debt, lenders cannot pursue you for collection
- HOA liens, judgements are all negotiated and paid through the short sale negotiation process, giving you a fresh, clean start
- Cash at closing-you will be paid a minimum of $3000 and up to $30,000 incentive money to short sell your home.
Make sure that you understand all of the program guidelines and that your short sale is handled by an experienced, certified Realtor. This is your chance to get out from under a huge debt, and get a fresh start again.
Susan Gregory is a Certified HAFA Specialist, a Certified Distressed PRoperty Expert, Short Sale Foreclosure Resource Agent, and a Certified Negotiation Expert. She is the author of the best selling resource, The Complete Loan Modification Guide kit and Loan Mod Calculator.
Comments(1)