South Jersey Real Estate: Differences between a Short Sale & Foreclosure

If you are a homeowner in South Jersey and you have fallen behind in mortgage payments and can no longer afford your home, but also cannot afford to sell your home, knowing the difference between a short sale and a foreclosure can help you understand what you should do to best help yourself and your family.  A homeowner who loses their home to foreclosure, puts three main areas in jeopardy.

Credit Scores:

A credit score is one of the single most important numbers that affects your ability to get loans and the cost of getting those loans. With a foreclosure, your credit score will drop as much as 300+ points and will remain on your record for 7+ years.  However, with a short sale, only late payments will show for your mortgage, and the effects can be as short as 12-18 months.   In addition to this, 100% of foreclosures the bank has the right to pursue a deficiency judgement, whereas with a short sale there is a possibility to convince the lender to give up the right to per sue this.

Employment:

Many employers today require a credit check for new employees as part as the hiring and application process.  For current employers, many also routinely complete routine credit checks as well.  With a foreclosure on your record, employment will become a challenge as well for current employment, as it can be grounds for termination.  With a short sale, this is a non-issue, as it is not reported on a credit report. In addition, for employees with jobs in the military or government, your security clearance could be in jeopardy, as opposed to a short sale where this is not a challenge.

Qualifications and Costs for Future Loans/Mortgages:

When you lose your home to foreclosure, you become ineligible for a Fannie Mae loan for up to 7 years.  Also, for other future loans, you will need to disclose that you have had a property foreclosure upon in the past seven years.  This can affect your approval, your rates or your loan terms for future loans.  With a short sale you are eligible for a loan in as little as 2-3 years.

Keep in mind, this is just general information, and it is always advised to talk to a legal, tax or real estate professional for your specific situation and how you could be affected.   In South Jersey, 1 in every 5  homes is in some sort of distressed situation.  Educating yourself with the right information, and working with the right processionals can be the difference between successfully negotiating a short sale or losing a home to foreclosure.

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