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April 29, 2014 April 29, 2014
If you can no longer make your mortgage payments and want to avoid going through foreclosure, you can ask your lender to sell your home for less than the amount currently owed, also known as a short sale. Although you benefit in the short term by the lender agreeing to write off the difference, in the long term, a short sale will negatively impact your credit rating.
The good news is the damage can be undone. While a negative credit remains on your credit report for seven years, you could be eligible for another loan after two years. Moreover, good credit
behavior can reverse your negative credit history even while the bad item remains.
Short Sale Overview
To qualify for the short sale of a home in default, the seller must prove that the home is worth less than the unpaid balance due. Then the seller must submit a “letter of hardship” explaining why he can no longer make the monthly mortgage payments or pay the difference owed upon sale. Examples of hardship include:
- Sudden illness
The lender will carefully examine all financial records to verify that the seller has no assets that can be used to pay the shorted difference.