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.
