Today I received a very valid question through an email from an Oxnard home owner. The Ventura County home owner who contacted me has not missed a payment on his mortgage. However, due to some financial changes his family won’t be able to continue making their mortgage payments much longer.
“I am interested in finding out more about the short sale process. In particular how does a short sale affect my credit rating?”
This is a great concern for many Ventura County home owners who may not be able to keep up with their mortgage but wish to keep a decent credit score.
Short sale is a process in which your lender agrees to the sale of your home for a price which is less than the balance you owe your lender. There are conditions and stipulations that the home owner needs to meet in order for their lender to consent to a short sale.
How Does A Short Sale Effect My Credit Score?
Effect Of Short Sale On Your Credit Score If You Have NOT Missed A Mortgage Payment:
If you are not behind on your mortgage payment the first thing you need to present to your lender is a hardship letter where you explain why you feel eligible for a short sale. Financial hardships are situations that prevent the home owner from making their mortgage payments such as a loss of job, divorce, death, or illness.
You can list your home for sale while waiting to hear whether your lender agrees to short sale your Ventura County home or not. Once you list your home for sale, your property is placed on the Ventura County MLS for sale as a short sale by your Realtor. It is very important that you hire a Realtor who has extensive knowledge on how short sales work. After submitting a Borrower’s Authorization form to your lender your Realtor can then communicate and negotiate on your behalf the terms of the short sale.
If you wish to not have a significant drop in your credit, you should continue making your mortgage payment While your home is being marketed for sale. There could be a slight negative effect on your credit score when you short sell your home in this manner. However, if your lender decides to show the mortgage as “paid in full” then your credit remains untouched. There are ways to negotiate with your lender for the least impact on your credit score. If you need any help on short sales in Ventura County, please don’t hesitate to give me, Mana Tulberg, a call: (805) 443-8898.
Effect Of Short Sale On Your Credit Score If You Have Missed A Mortgage Payment:
Missing a payment on your mortgage has a definite negative effect on your credit score. The way your credit score is calculated is based on your payment history, amount of your debt, length of your credit history, new credits, and types of credits you use. The more days you fall behind on your mortgage, the harder the effect on your credit score.
Ventura County home owners who have missed payments on their home still have to get their lender to agree on a short sale. After 3 months of missed payments your lender will issue a Notice Of Default (NOD) and the foreclosure procedures will start from this point on. However, you can still negotiate a short sale with your lender.
The negative effect of a short sale on your credit score is far less than if your home was foreclosed upon. Foreclosure remain on your credit score much longer than short sales. A short sale can drop your credit score up to 100 points. After a short sale if you take care of your credit it is possible to purchase a new home in less than 2 years. The record of a short sale might remain on your report for more than 2 years. Nevertheless, you should be able to apply for a loan with no problem in less than 2 years after your home has sold in a short sale (assuming you have maintained your good credit).
After you have successfully sold your home in a short sale, it is very important that you know how your lender will report the remaining balance of your loan to credit reporting agencies.
If you have any questions regarding short sales in Ventura County please don’t hesitate to contact me, Mana Tulberg, (805) 443-8898.
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hi, i am approved to do a short sale but will not be missing any payments leading up to the sale of the house and my lender will show that the mortgage is “paid in full.” do you know how this may affect my credit score? will the short sale be on my credit report or negatively affect me in 3-5 years from getting great rates (i have a 750 credit score now)? your article states that in this case, my credit will remain intact. where did you find that out? how can i corroborate this in virginia, where i live?
thanks,
kevin
The best people to contact would be your lender. That being said, if you have not missed a payment and continue to not miss a payment during the short sale process, your credit should stay clean.