Short Sale vs. Forclosure

• A short sale will negatively affect your credit score, but foreclosure not only will lower your credit score by more points but will stay on your record for 10 years.


• While there is not a specific credit reporting item for short sale, your credit history will typically report the short sale as paid, settled in full or paid as negotiated. A foreclosure will stay on your record for 10 years and is a permanent record in the county public records.


• A short sale will probably not affect your employment, but employers have the right to check your credit and sometimes a foreclosure can be grounds for dismissal, especially if you're in a sensitive job position. As for future employment, a foreclosure is one of the most negative items on credit reports and can most assuredly affect future employment.


• For future mortgage applications, you do not have to disclose a short sale and you may be eligible for a Fannie Mae loan after 2 years. On the standard loan application you will be required to disclose whether you have a bankruptcy or given a deed in lieu of foreclosure in the past 7 years. A 'yes' answer determines your interest rate, which will be considerably higher and you may be declined. It will take a minimum of 5 years before you can be considered for a Fannie Mae loan.


• In most states a deficiency is typically forgiven in short sale situations. However, with a bankruptcy the bank has the right to pursue the deficiency if allowed by state law.