What Should You Do After A Short Sale?

What Should You Do After a Short Sale?

We are often asked, “What should you do after a short sale?” If you were a homeowner between 2006 and 2011, chances are you saw the value of your home at all-time high and seemingly fall overnight to a value less than your mortgage. And you weren’t alone. It is estimated that by September of 2010, 23% of all American homes were worth less than the mortgage loan. [Source] While some homeowners weathered the market and are experiencing an upswing, many chose to short sell their homes.

What Should you do after a Short Sale?

If you were a homeowner between 2006 and 2011, chances are you saw the value of your home at all-time high and seemingly fall overnight to a value less than your mortgage. And you weren’t alone. It is estimated that by September of 2010, 23% of all American homes were worth less than the mortgage loan. [Source] While some homeowners weathered the market and are experiencing an upswing, many chose to short sell their homes.

What is a short sale?

A short sale occurs when a bank accepts the sale of a property at an amount less than what is owed. It is often alternative to foreclosure as was the case for many homeowners between 2008 and 2011.

What should you do after a short sale?

A short sale stays on your credit for seven (7) years and, while not as detrimental as a foreclosure, has nearly the same negative impact on your credit score. The short sale should appear on your credit report as “Paid/Closed with zero balance” with a comment of “settled for less than full balance”. However, the banks make many errors reporting short sales and the errors are almost always unfairly punitive.

On August 16, 2014, the waiting period after short sale to secure a new conventional loan changed from two years to four years. It is more important than ever to make sure that your short sale is reporting correctly, otherwise mortgage underwriting software could “interpret” the event as a foreclosure, which has a seven year waiting period.

While it will take about 24 months to see a positive change in your credit after a short sale, you can help your credit by doing the following:

  • Pay bills on time
  • Use a fraction of credit available to you (below 30% of credit limit on a card, for example)
  • Lower all debt including car loans and credit cards
  • Monitor your credit with FREE Credit Karma
  • Get a copy of your FREE Annual Credit Report at www.annualcreditreport.com

In other words, do everything you should to get and keep clean credit. For those looking to buy another home after a short sale, know that it is possible.  Go Clean Credit has been correcting short sale mortgage reporting with the banks for several years; we are experts. If you had a short sale less than 4 years ago, we also have an Expungement program that uses a legal process to completely remove the short sale reporting.

If you have questions about short sales or other items on your credit report, make an appointment for a FREE CONSULTATION with Go Clean Credit.

 

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