At MortgageDepot, our clients often asked us about the potential impact on their financial picture from short sales. Sometimes we have a client who’s considering short selling a home, and they simply want to know what their financial outlook might look like in the aftermath of such a scenario.
The reality is it’s difficult to answer this question. Every consumer is unique. Years of history go into every FICO profile, and there are 3 different companies that report FICO scores, each of which has its own method of calculating scores. While a short sale is never a positive thing for someone’s credit scores, the exact impact depends largely on the individual factors of each consumer’s history.
That said, we have ample data from which to calculate the average range of effects short sales have had in the past on the credit scores of consumers.
There are 2 types of short sales. In one, the seller negotiates a listing price with the bank then finds a buyer willing to pay that price. This is called a short sale with no deficiency balance. In the other, the seller negotiates a sales price with the bank but is unable to find a buyer willing to pay that price. In that scenario, the bank takes an even deeper loss, and it’s called a short sale with a deficiency balance.
Here’s the average effect each of these types of short sales has on consumer credit scores:
In short sales with no deficiency balance:
- Consumers who previously had a FICO of 780 drops to between 655 and 675.
- Consumers who previously had a FICO of 720 drops to between 605 and 625.
- Consumers who previously had a FICO of 680 drops to between 610 and 630.
In short, sales where there is a deficiency balance:
- Consumers who previously had a FICO of 780 drops to between 620 and 640.
- Consumers who previously had a FICO of 720 drops to between 570 and 590.
- Consumers who previously had a FICO of 680 drops to between 575 and 595.
If you’ve had a short sale or a foreclosure, that doesn’t mean you can’t be qualified for another mortgage. At MortgageDepot, we’re experts on helping all types of borrowers find loan options. If you’d like information on getting a mortgage loan, even if you’ve had a short sale or a foreclosure in the past, contact us at (800) 535-0270 today!