Letting Mortgage Go Delinquent To Qualify For Short Sale Damages Credit

In order to qualify for a “short sale,” in which the lender agrees for the house to be sold for less than the remaining amount owed and takes a loss, the lender sometimes requires the homeowner to be several months delinquent on their mortgage payments. But while getting out of a house you can’t afford can be a good idea, bear in mind that the delinquency will stain your credit report.

As Experian’s “Ask Max” explains,

The late mortgage payments will remain for seven years from the date they first became late. The further in the past the late payments occurred, the less impact they will have on credit scores. As the delinquencies become further in the past, your credit scores should improve, assuming you have kept all of your other payments current.

So while a short sale might keep you from losing your shorts, you will have to deal with that derogatory item riding up in your credit report for the next few years. Even still, it can be worth it. Worse than a few late payments on your credit report? A foreclosure.

Impact of allowing mortgage to go delinquent to qualify for short sale [Experian]

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