If you’re behind on your payments, the combination of late fees and a short sale could have the same impact as a foreclosure on your credit score.
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Your living arrangements during a short sale are like those during a regular deal, except it may take much longer. Homeowners are expected to keep their home in good condition for viewings and will need to regularly vacate the home for showings and open houses. Failure to pay your mortgage during this time will cause you to lose more points off your credit score.
If you choose to do a foreclosure, you can live in your home up to four months free in many states. This can allow you to save up some much-needed cash for a deposit on your next house.
While this may seem like the best way to save up for your new purchase, it will usually take about 24-72 months before you’ll be offered a reasonable interest rate after a foreclosure or short sale.
There would be a respite to this if the seller was able to keep the payments current before and during the short sale. A new guideline was put forward in 2010 by the FHA4 that a seller can qualify to buy a new home immediately if they stayed current with their payments during their short sale.
Cash for Keys
After the real estate market crash in 2007, banks found themselves with an influx of foreclosed homes.3 With this rise came the introduction of pay for keys as a standard procedure. Banks quickly learned that lengthy court proceedings and hefty repair bills cost more than offering occupants a sum of money to vacate the property and return their keys.
While this isn’t always offered, occupants can often negotiate a small amount. Negotiations are to cover moving expenses as well as the cost of first and last month’s rent. In exchange, occupants must leave home in a good clean condition without leaving any pets behind.