When you owe more than your ever-plummeting home is worth, a foreclosure or short sale — in which you sell the home for less than you owe — can seem like an attractive escape. The move may make financial sense, but it comes with repercussions to your credit and somewhat strict qualification parameters.
Bible Money Matters offers a short-sale primer. First, know that you’ll need to do a bunch of paperwork. You’ll need to convince your lender that the short sale makes sense for both of you. Expect to provide a hardship letter explaining why you need to go that route, including proof of your income and assets, and eventually a purchase agreement from a buyer.
Not everyone can qualify for a short sale. You must have some reason that qualifies your hardship, such as a divorce, a death in the family, health problems, unemployment or bankruptcy.
If you succeed with the transaction, there are consequences to consider. It will probably take you two years to be able to qualify for a Fannie Mae or Freddie Mac-backed mortgage, and your credit score could fall between 200 and 300 points.
Will A Short Sale Hurt Your Credit, And Will You Even Qualify For One? [Bible Money Matters]