Hi. My wife and I are selling our house. By the time we sell it at a loss (the market has dropped considerably here), pay realtors and other costs, we will be upside down about 15k at the closing table.
Here’s my question: If we talk to the bank about allowing a short sale so that we aren’t upside down at the closing table how badly does that affect our credit vs. a foreclosure? Am I in trouble either way? I’d like to find an out without destroying my credit. Thanks for any help.
I copied this from the fannie mae August 13, 2008
Announcement 08-16: Bankruptcy, Foreclosure, and Conversion of Principal
Residence Policy Changes; and Revised Property Value Representation and
Warranty Requirements
Frequently Asked Questions Section
If a borrower has completed a short sale and was never delinquent on that
mortgage and is now attempting to purchase a new primary residence, will Fannie
Mae purchase the loan?
If the borrower is purchasing a new property and the previous mortgage history complies
with our excessive prior mortgage delinquency policy and does not have one or more
60-, 90-, 120-, or 150-day delinquencies reported within the 12 months prior to the
credit report date, the loan is eligible for delivery to Fannie Mae, provided the lender or
servicer who completed the short sale has not entered into any agreement that obligates
the borrower to repay any amounts associated with the short sale, including a deficiency
judgment.
So from reading that it sounds as if you can sell the property with incurring any late pays you should be fine.