In these times of economic turbulence and many homeowners are faced with hard decisions, it pays to have the facts about which choices to make regarding your property.  As the following guidelines are an overview of some of the effects of each Foreclosure and Short Sale and designed to give you an idea of the consequences of either, each case is different and I recommend to seek the advice of a qualified specialist before you or someone you know makes a decision:

 Foreclosure:  Homeowners who lose their homes to foreclosure are ineligible for a Fannie Mae backed loan for a 5 year period. 

Short Sale:  Homeowners who successfully navigates, negotiates and closes on a short sale are eligible for a Fannie Mae backed loan in 2 years. 

Foreclosure:  Will often reduce a borrower’s anywhere between 250-300 points and remain on credit record for over 3 years. 

Short Sale:  After closing, not reported on a credit score.  There is no specific ‘Short Sale’ item on credit score.  Report generally reads: ‘Paid in Full, Settled’.  Beware of “rolling late payments” prior to Short Sale.  This WILL negatively affect borrower’s score. 

Foreclosure:  Security clearance can be revoked or terminated if a borrower is a police officer, military personnel, CIA or Security officer which requires such clearance.

 Short Sale:  Does not challenge most security clearances. 

Foreclosure:  Employers have the right to check the credit of employees in sensitive positions.  A foreclosure may be grounds for immediate reassignment or termination. 

Short Sale:  In most cases, not reported on a credit report. 

Foreclosure:  Many employers are requiring credit check on all applicants.  A Foreclosure on a credit report may challenge employment. 

Short Sale:  In most cases, not reported on credit report.

In closing, be aware that in a Short Sale, a bank may ask the borrower to sign a promissory note committing to pay back losses to the lender.  Additionally, the bank may send a 1099 to the borrower for the motgage relief.  Again, always check with a qualified specialist before making any decisions.