Impact Of Foreclosure Or Short Sale On Fico Score
In regards to the options between a short sale or foreclosure. They both have the same impact on your FICO. If you have gone 90 days without making a payment it is reported to the credit company as a foreclosure. The time that this will effect your ability to purchase a new home is 3 years (previously 2, but with the flood of foreclosures this time has been extended)Unfortunately, with investment properties, it is very difficult to do a loan modification. A foreclosure or deed in lieu are your best options considering that even with a short sale, the creditor can still choose to come after you for the remainder of the money owed. The upside to a short sale is that the process is much shorter and the repercussions can be put on the back burner.
With a foreclosure it can take 12 months before they can even remove your tenants (meaning you can still collect rent from them and purchase a new home before the foreclosure shows on your report). The reason that the bank wont consider a short sale until you are 90 days late is that they have so many trying to do loan mods and short sales that they dont want to deal with someone unless they have to. They will negotiate with legal representation, and see that it will be cheaper for them to help you now than later. Concerning the credit: Though your history can go back 7 years, this doesn’t mean derogatory reports must remain there the entire time. Once these items are reported, as a consumer in accordance with the FCR act, you have the right to contest derogatory marks.
Not to say that they didn’t happen, but to be sure that they are not causing you undue harm in your credit world as well as to be sure that they are reported according to that act. Let’s say that you have a foreclosure on your report. In 9 months from now, that file is in storage somewhere and could have already been sold to a third party . With the right legal help, you can challenge the items reported. In most cases, it is too costly for the company to be within the guidelines of the act. There is a lot more I have to say regarding the credit issue considering I am a former Mortgage Broker who now does credit repair. I would love to help in anyway I can.