Need to finance a home this year? If you had a previous short sale, pay very close attention to your credit report, because it might list the home as a foreclosure. It’s important to know how this difference can prevent you from getting a new mortgage again, and how you can deal with it so you can get a mortgage.
Maybe you’re purchasing another home to live in, or for investment property. Perhaps you’re financing your primary home for a specific purpose. Whatever the reason, the credit reporting from the previous shorted lender can make or break your new mortgage.
Short-selling allows homeowners to avoid foreclosure. Foreclosure involves defaulting on the mortgage, and essentially giving the house back to the bank, and is typically seen as the worse event of the two, in terms of credit-worthiness.
Lenders are obligated to report the true and exact circumstances surrounding a delinquency. When reporting on a short sale, they will typically report “Settled for less than full balance.” This is what the new lender you’re working with on your loan will want to see because this indicates the previous property was a short sale.