Question: I am working on a short sale with my primary lender and plan to move into my condo that was a rental. I have a second on the condo that is held by the same lender I’m doing a short sale with. This loan is floatin at todays rates. Do i need to worry about this loan when my credit goes south after the short sale and will i be able to refi it after a short sale
Answer: – Your credit will be affected for a few years after the short sale. The short sale credit impact you feel will only be for a short sale and is not as bad as a foreclosure or bankruptcy. With a little diligence and credit repair, you should be able to refinance within a few years once your credit is established again and assuming your home value does not decrease. Lending and re-financing has tightened up a bit and good credit is still a big factor.
I am in a situation where we have an ARM that will be increasing over the next year. We will not be able to afford it once it does. We have tried to refinance but are unable because we can’t get our home to appraise for what we need it to to refinance because of all of the foreclosures in our area has made our comps extremely low. We would like to put the house on the market and even if we sold it for about 125 we would have to pay about 7k at closing. Which we can not afford. If the house does not sale it will have to go into foreclosure. Would this be the type of situation in which our lender may do a short sale. If the current mortgage payments have been paid on time would a short sale effect our credit? I wasn’t sure how it works in Texas. Any advice would be great. Thanks.
Typically for a bank to accept a short sale, the homeowner has to be behind on payments. If the mortgage is current, they lender has no motivation to discount or accept less than what is owed. If you are late on payments this does affect your credit. Once you are issued a Notice of Default, this affects your credit even more. If it goes to foreclosure, then your credit is really hit hard. A short sale is there to prevent a foreclosure from going on your credit. However, your credit will still be hit with the late payments, and NOD.