Credit Consequences: Short Sale Vs Foreclosure
A common mistake made by most in consideration of a short sale is forgetting to consider the negative impact of delinquent mortgage payments on credit history. Completing a short sale transaction does have a negative impact; however, delinquent mortgage payments tend to be much more damaging to credit. Until the delinquent payments are satisfied, borrower credit gets continual negative reports. In many cases upon the completion of a short sale, reports of delinquent mortgage payments stop (because the mortgage debt is closed), and credit begins to improve dramatically.
If you were to consider a foreclosure over short sale, your credit will receive reports of delinquent mortgage payments until the foreclosure is complete. With a foreclosure taking at least 180 days, completing a short sale in 90 days could reduce negative reporting to credit significantly. Additionally, in some situations, a short sale may be completed without any missed mortgage payments thereby eliminating any negative reporting from delinquent mortgage payments.
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