If keeping your house is not an option, a short sale lets you escape the devastating consequences associated with a foreclosure. In a short sale, the lender agrees to allow you to sell the house for much less than you owe. Although your liability is released, your credit score still will endure. The drop is not as intense as a foreclosure, but it is going to lower your score and stay in your report for up to seven years. It is possible to recover from a short sale and even own a house again.
Safe secure housing. You’ll need to wait at least a few years before you can be eligible for a mortgage loan again. Rent a house or stay with a relative at the meantime. Hope to pay a higher security deposit with a short sale on your own credit report if you plan to rent.
Pay bills on time to improve your credit score. Keep your current accounts in good standing to lessen the effect of the short sale on your credit history. The specific amount of factors a short sale enhances your score changes, but a person with a few blemishes may feel a less substantial drop than someone with perfect credit.
Obtain a secured credit card to rekindle your charge if you don’t have credit cards or loans. You set the spending limit with a secured credit card, and your available credit limit is equivalent to the deposit you pay. The deposit is not applied toward your balance but rather acts as collateral should you default.
Lower your debt-to-income ratio by paying down credit card balances and loans. If you intend to buy again, the lending institution will assess the amount of debt you’ve got in proportion to your monthly income.
Save up a down payment. A down payment of 20 percent or even more will cut Fannie Mae’s time-wait penalty down to 2 years in seven.