If you short sell your house but never make a late payment???

Question

What happens to you credit? I have a friend that has amazing credit, but they own a house they owe more on than it is worth and have to move out of state for work and renting the house out wont work because their mortgage payment it too high to have it be a break even,. So what happens to someones credit if they never pay the mortgage late but the sell for less than is owed??

Answer 1

The lender won't allow a short sale unless your friend is in financial trouble.  They will have to make up the difference, stop paying and let it foreclose, or rent it out and take the loss each month until the market improves.  

One remote possibility is deed in lieu of foreclosure.  If the owner explains the situation to the lender, they may allow her to release title back to them and let her move.  HIGHLY unlikely though.

Anything but renting it out is going to cause a big hit to her credit score, especially foreclosure.

Answer 2

and it's your concern because. . . . . .

it has some impact on credit, but if it's the only significant event it won't destroy their rating

Answer 3

You are a mortgage planner and you are asking this?

I bet you do not get a lot of repeat business.

There will not be a short sale, you should know this.

Answer 4

Your friend will likely have to bring cash to closing if he wants to sell.  I had to take cash to closing to sell my place.  It sucks, but it is what it is.

And, the concern over not breaking even renting it out should be far less a concern then s******g his credit for 7 years.  When he moves to another state he may have to just get a cheap apartment for whatever amount he's getting in rent from his current home.

Answer 5

Someone asked this a few hours ago.

No, the bank will not approve a short sale.   She can try to sell short, but she needs to bring the 75k or whatever the differance is to closing herself, otherwise, no deal.

She can not s***w them over and expect to keep her shiny credit.

Answer 6

Most banks don't approve short sales for loans that aren't in "trouble".  Meaning you pretty much have to be running behind in your payments.  In your friend's case, they may very well owe the bank for what ever is not received at closing.

Answer 7

They can't sell it that way because the lien from the current mortgage won't be lifted by the bank until they are paid in full.

It's called a foreclosure.