Q. What is the impact of a short sale on the credit report/score?

A. There is no easy answer here. It will depend how the lender will report the short sale. A short sale should report a zero balance and a zero past due. The impact on your score will depend upon the current profile of your credit history and is too hard to predict or generalize. It is possible that with an excellent credit history a short sale can have minimal impact on your score.

Q. How will the lender even know there was a short sale? My credit report just shows it is paid? Can't I just say I sold my home?

A. Don't try to be slick and think a new lender won't know about a prior short sale. Lender's require a copy of the Settlement sheet (HUD-1) from the prior sale. Also, there are comment codes that may not appear on a credit report will be read by the automated underwriting systems lenders use.

Q. Can you rely on Fannie Mae/FHA guidelines when the lenders/secondary market don't follow those rules?

A. No. Many lenders have stricter requirements so you need to check with your lender. Those stricter requirements are what known as overlays. For example, there may be additional requirements in regard to credit score or down payment when obtaining a loan after a major derogatory event.

Q. What's the difference between a deed-in-lieu, and a foreclosure?

A.  For the most part a foreclosure means legal action was initiated as a result of default. Even if the home is sold and a foreclosure never happened, once it has been initiated, it will be viewed as a foreclosure in terms of underwriting the loan. A foreclosure will appear as a public record on your credit report. Public records remain on your credit report for 10-years. A deed-in-lieu is a friendly foreclosure where the deed is turned over to the lender so that legal action (foreclosure) is not commenced.

Q. What are the extenuating circumstances that allow for the shorter time frame?

A. Extenuating circumstances are isolated one time occurrances beyond your control. Examples include death of a wage earner or a serious illness. Divorces, inability to sell a home due to job transfer or relocation are not extenuating circumstances. For more details, contact Allied Mortgage Group at 215-355-5626.

Q. What is meant by requirements to re-establish credit?

A.  After a major derogatory event such as a bankruptcy, you will need to show how you can effectively manage your financial affairs. You will have to have a satifactory payment history with no late payments since the derogatory event.

Note to the wise:

This information is based on today's information. Even though these are current guidelines; guidelines are always changing. What might be allowable today might not necessarily apply in the future.