Why Mortgage Lenders Want to See a Short Sale Rather Than a Foreclosure?

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Like a foreclosure, a short sale is going to negatively impact your credit, albeit to a lesser extent, in Florida. Your mortgage lender may report it to credit bureaus as a loan settled for less than the amount due, a deed-in-lieu of foreclosure, or a charged off.

While a short sale can stay on your credit reports for up to seven years, working with a reliable company advertising “we buy houses in cash in Orlando and Jacksonville” can help put you in a good light when you choose to apply for a mortgage again in the future. From a lender’s standpoint, a short sale can send a strong message about the following:

Lender handing in house keys

You Did Not Walk Away from Your Financial Obligation

A short sale can say a lot about your character as a borrower. This notion holds true since you can choose to stop making payments and force your mortgage lender to exhaust legal remedies to get paid on some level.

Considering that foreclosure legal proceedings are time-consuming and costly themselves, they are often unattractive to creditors that are already looking at the prospect of a massive financial loss. No mortgage lender wants to accept money less than is owed to them, but this scenario is more appealing than going through the foreclosure route. You may consider an item that represents the short sale in your file as negative, other mortgage lenders may find it neutral. Yes, it is bad, but it can be a way of making the best out of a bad situation for both parties.

You Did Enough to Stop the Bleeding

Going for a short sale tells mortgage lenders that you think with your credit in mind. You understand that a foreclosure is more damaging to your creditworthiness. More often than not, a short sale can show the creditors that you act with a bit of foresight.

Many irresponsible borrowers do not get the gravity of foreclosure or simply do not care about the implications of suddenly refusing to continue mortgage repayment. If you decide to buy a house again once you recover financially, a short sale help you get approved. If you do what you have to do to bring your FICO scores up steadily, you may be allowed to take out another mortgage within two years.

You Just Had Bad Luck

House on pile of money

Not all borrowers who have mortgage repayment problems are necessarily bad at finances. Sometimes, they just are unlucky. Major life events, like getting laid off, being incapacitated due to a medical illness, or having a divorce, can affect a person’s ability to manage debt big time. If you have an acceptable reason for not be able to continue your payments coupled with a short sale on your credit reports, many mortgage lenders may understand and be willing to give you another shot at homeownership.

A short sale is better than a foreclosure any day. To further minimize its impact on your credit, make sure your mortgage is not delinquent by the time the debt is settled. A good payment history can help restore your creditworthiness more quickly