Short sale?

It's no surprise that in this economy both banks and individuals are being confronted with hard times. Due to this instability, banks are becoming stricter and trying to find ways to compensate for lost revenue. According to Michael C. Gray, a CPA in California, this includes increasing interest rates and converting amortization of principal for interest only loans. Because of this, many homeowners are falling too far behind and have to make the choice of whether to "walk away" and allow foreclosure or to try sell.

If a foreclosure or short sale is filed there are two important things to know about how it will affect your credit report. Both short sale and foreclosure are derogatory items that will remain on your credit report for seven years. The main difference is that if a home is foreclosed on it will report as "foreclosed" whereas a short sale may read "settled" or "charge off" thus carrying a lighter penalty to the credit score. Due to new Fannie Mae rules wording may be crucial. The automated underwriting system may see the word "foreclosure" and automatically reject a loan.