How is the Short Sale Reporting on the Credit Report?

How a short sale reports on a credit report is important, it can make the difference between an approved mortgage or a denied mortgage. On a conventional loan, someone who had a short sale 2 years ago or more, and had an extenuating circumstance (job loss/reduction, medical, divorce, etc.) is eligible for a new conventional mortgage. However, the way the short sale reports can make a difference with the approval.

 

Ideally a short sale will report as "settled for less than amount due" or some deviation of that, and show a $0 balance and $0 past due. In some cases the short sale was never updated and shows on the credit report as being a foreclosure that is still past due. This makes a difference.

 

I had a client who had a short sale just over two years ago, it reported on the credit report as a settled account, and  the client has a good explanation for the reason the short sale occurred. I ran the file through automated underwriting and received an approval. A different client, same facts, except the short sale reported as a foreclosure with no reference to the account being settled, this loan was not approved by automated underwriting.

 

Same scenario for both borrowers, but the way the credit report is reporting can make a huge difference, make sure the credit report is reviewed for accuracy because when someone is ready to buy they may not be in the best position due to how their credit report is reporting.

 

If someone isn't sure about how to address their short sale have them contact me to get them in position to get a mortgage.

Have a mortgage or credit question you would like for me to cover on this blog? Shoot me an email so I can address it. If you want to apply for a mortgage in Arizona give me a call at 480-203-4641, the application process is easy, and it only takes 10 minutes for me to get the information to get you started on your way to home ownership.

Patrick Ritchie
Mortgage Finance Instructor

Ritchie School of Real Estate Finance

480-203-4641 Cell
Patrick@PatrickRitchie.com

NMLS# 276438 AZ#0913109
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