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New Member
From_LV
Posts: 1
Registered: ‎01-23-2011
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Short Sale a house with up-to-date payment

[ Edited ]

Hi,

 

I'm considering short sale my house, but I don't want to hurt my credit score.  I was told that the bank allows you to short sale a house without deliquent payment.

I'm wondering even if I have no late payment on the mortgage, will short sale hurt my credit score?  Have anyone gone through that? How does it effect your credit score?

 

Thanks,

Regular Contributor
laronda134
Posts: 143
Registered: ‎12-05-2007
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Re: Short Sale a house with up-to-date payment

I think u acutally have to try to sell your house first? I may be wrong though.

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Senior Contributor
StartingOver10
Posts: 4,059
Registered: ‎03-06-2010
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Re: Short Sale a house with up-to-date payment

[ Edited ]

laronda134 wrote:

I think u acutally have to try to sell your house first? I may be wrong though.


No. You don't have to try to sell your home first.  A short sale is where the market value of the property is less than the outstanding mortgage(s) and other liens that may be on the property. So you are asking the bank to accept a short payoff on the mortgage in order to sell the house. Most people ask for both the release of lien and the release of debt. It is up to the lender/servicer to decide if they will accept the short sale and under what terms they will accept it.

As to whether you have to be in arrears, it depends upon the investor that owns your mortgage. Some investors require you to be arrears and others don't; but in order to get your short sale approved you would need to have a hardship. If you are looking to move or transfer because your job transferred, that is also considered a hardship.

 

As to affecting your credit, your short sale will negatively impact your credit, even if you are current on your payments. However the credit recovery from a short sale seems to be much quicker than it is from a foreclosure.

New Contributor
UplandCitizen
Posts: 54
Registered: ‎10-18-2012
0

Re: Short Sale a house with up-to-date payment


From_LV wrote:

Hi,

 

I'm considering short sale my house, but I don't want to hurt my credit score.  I was told that the bank allows you to short sale a house without deliquent payment.

I'm wondering even if I have no late payment on the mortgage, will short sale hurt my credit score?  Have anyone gone through that? How does it effect your credit score?

 

Thanks,



From_LV wrote:

Hi,

 

I'm considering short sale my house, but I don't want to hurt my credit score.  I was told that the bank allows you to short sale a house without deliquent payment.

I'm wondering even if I have no late payment on the mortgage, will short sale hurt my credit score?  Have anyone gone through that? How does it effect your credit score?

 

Thanks,



From_LV wrote:

Hi,

 

I'm considering short sale my house, but I don't want to hurt my credit score.  I was told that the bank allows you to short sale a house without deliquent payment.

I'm wondering even if I have no late payment on the mortgage, will short sale hurt my credit score?  Have anyone gone through that? How does it effect your credit score?

 

Thanks,


I am almost done with a short sale and have never been late, so Banks are approving short sales without delinquency if you have an imminent hardship i.e. loss of spouses job etc. 

A short sale will hurt your credit but I'm not sure how much.  I know it will depend on how your credit is now. 

 

 

EQ: 806 (10/10/2012)
TU: 811 (11/25/2012)

After Short Sale 11/20/12:
EQ: 694 (12/1/2012)
TU: 677 (12/5/2012)
Frequent Contributor
Kozmo
Posts: 320
Registered: ‎07-08-2012
0

Re: Short Sale a house with up-to-date payment

Ask your lender if you can be approved for the HAFA short sale....doesnt effect your credit as bad as a normal SS

New Visitor
MarcBu
Posts: 2
Registered: ‎11-11-2012
0

Re: Short Sale a house with up-to-date payment

My wife and I just sold our house about a month ago (we moved out 2 years ago).  We were going to do a short sale, because at the time, the market setting for our house and our income was just too far apart.  From the research that we did, talking to realtors and banks alike, if you do a short sale. 1. It takes a long time even if the payments are up to date. 2. It will affect your credit.  Not as much as foreclosing but, it will hurt it. 3.  You have to pay taxes on your losses, because the bank is "forgiving" the difference between the sales price and the actual price.  In IRS speak, the bank is gifting you the difference in what you owe and what you sold the house for.

 

In the end we ended up not doing a short sale.  We were in hardship for almost two years, then we came out.  It still stings a bit making that monthly payment to cover our losses, but not as much as the monthly mortgage payment.  It was so bad just getting a personal loan to cover the losses.  The mortgage company Citimortgage wouldnt do out a loan and our credit score is 777!

Community Leader
Senior Contributor
StartingOver10
Posts: 4,059
Registered: ‎03-06-2010
0

Re: Short Sale a house with up-to-date payment


MarcBu wrote:

My wife and I just sold our house about a month ago (we moved out 2 years ago).  We were going to do a short sale, because at the time, the market setting for our house and our income was just too far apart.  From the research that we did, talking to realtors and banks alike, if you do a short sale. 1. It takes a long time even if the payments are up to date. 2. It will affect your credit.  Not as much as foreclosing but, it will hurt it. 3.  You have to pay taxes on your losses, because the bank is "forgiving" the difference between the sales price and the actual price.  In IRS speak, the bank is gifting you the difference in what you owe and what you sold the house for.

 

In the end we ended up not doing a short sale.  We were in hardship for almost two years, then we came out.  It still stings a bit making that monthly payment to cover our losses, but not as much as the monthly mortgage payment.  It was so bad just getting a personal loan to cover the losses.  The mortgage company Citimortgage wouldnt do out a loan and our credit score is 777!


I take issue with the statement above in red. If your home is a primary residence (not investment or rental type) then the Mortgage Debt Forgiveness act of 2007 waived those taxes for most short sales. You would need to search for the IRS publication dealing with it on their site to see it in writing. However, the deadline is coming up now, Dec 31, 2012. Unless the 2007 ruling is extended, then and only then, your statement will be correct for short sales that close after Jan 1 2013.

New Visitor
MarcBu
Posts: 2
Registered: ‎11-11-2012
0

Re: Short Sale a house with up-to-date payment

The problem we were having was that we weren't living in the house anymore therefore it wasn't technically classified as a primary residence as we pretty much had it up as a rental property.

 

Being a first time homeowner, we learned a very valuable lesson about purchasing and selling a home.  From what I figured out, the loan agency was pretty shady with information they were telling us.  We did an FHA loan, we had enough of a downpayment to get out of PMI, but the realtor was telling us it wasnt worth it.  Somehow our interest rate changed by +1.25% in two days(2007). So what I learned in the loan process is, that you need to do your research before buying, even better, eliminate the middle man and take care of it yourself.

 

 

New Contributor
UplandCitizen
Posts: 54
Registered: ‎10-18-2012
0

Re: Short Sale a house with up-to-date payment

Just completed a short sale without any late payments. My EQ score went for 806 to 694.  See my post on this site for detailed information about my short sale. 

EQ: 806 (10/10/2012)
TU: 811 (11/25/2012)

After Short Sale 11/20/12:
EQ: 694 (12/1/2012)
TU: 677 (12/5/2012)

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