How a Short Sale Will Affect Your Ability to Buy Another Home

Many San Diego homeowners have worked hard to preserve good credit. Some come to us with a pristine credit record, yet are saddled with debt – most of which they have incurred in order to keep current on mortgage payments. The conclusion that they need to offer their house as a short sale is a very heavy one to reach for any homeowner. And, for some, the idea of foreclosure seems painless and quick under the circumstances.

The real fact is that a lender will not like seeing either on your credit. AND, the very real fact is that you can recover your credit within 24 – 36 months after the short sale of your house while 60 months is the minimum after a foreclosure.

There are about as many opinions as people writing or speaking on this topic. The real answer is that no one really knows how a short sale will affect your credit scores.

I hear REALTORS┬« saying without a doubt… a short sale and a foreclosure are completely different. Then, I hear bankers and mortgage brokers saying that default is default… don’t do it. The truth is, both sides of the coin are right. What the mortgage or loan officer fails to realize is that anyone asking that question is very likely without a BETTER alternative.

Only the people at Fair Isaac, the FICO people, really know what each item does to the math on your credit score. And there are many factors that go into the mix. In addition, since each person has a different credit history, the short sale of a home will affect different people in different ways.

Let’s assume that it is you asking the question. You’re paying the bills on time, but paying off the mortgage is not an option for you. Let’s say you are either in default or headed into default OR that you have decided to keep paying the note on the asset that has lost a large chunk of value.

Let’s assume that you are thinking about the credit risk of foreclosure versus a short sale.

We know that a default is a default. And you will probably never get through a short sale UNTIL you are in default. If you are paying the bills, the lender assumes that you must have some means to do so, somewhere.

So, if you want to Buy a Home After a Short Sale…

A foreclosure will remain on your credit report in the public records section for 10 years. In addition, you will need to answer these questions on any loan application:

  • Have you ever had property foreclosed upon or given title or deed in lieu thereof?
  • Have you directly or indirectly been obligated on any loan which resulted in foreclosure, transfer of title in lieu of foreclosure, or judgment?

There is no such question for short sales.

Again, the real fact is that a lender will not like seeing either a short sale or foreclosure on your credit. But the second very real fact is that you can recover your credit with 24 – 36 months after the short sale of a home while 60 months is the minimum after a foreclosure.

If you’re ready to short sell your house, or simply have questions related to short sales, call 619-929-1413 or write td@tomdunlap.com.

We have a track record of 98% success in selling and closing the short sales we list – and we’ve helped hundreds of San Diego homeowners just like you avoid foreclosure and get on with life.

We’ll be happy to explain the process and answer all your questions.


Please note that the information provided on this San Diego short sale page is generic, academic information used for general information purposes and may not be construed as or relied upon as a promise for a specific outcome.

This site provides information about real estate, law, income taxes and credit scores as relates to borrowers in distress, short sales and similar situations. The site is designed to help users safely cope with their own needs. Information is not the same as advice — the application of law or regulations to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer, tax adviser or other specialist if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation. The models in photographs accompanying the testimonials on this website are used for illustrative purposes and are not a personal endorsement.