Mortgage Forum

Mike

Does a short sell affect a person's credit rating? If a person chooses to do a deed in lieu of foreclosure do they just hand the property over to the bank? I live in the state of Florida, would I have to ever repay the bank if I chose the in lieu of? I am honestly thinking about handing the house over to the bank. I just want to be able to pay my bills without any stress. My mortgage company is Litton. Does anyone have any experiences with them regarding short sales or deed in lieu of? Thanks

rachael24

According to David Steep, division manager at Vitek Mortgage, sellers will take as big a hit on their credit report by going through foreclosure as giving the lender a deed-in-lieu of foreclosure. Steep says the points lost on a FICO score are as follows:

• Foreclosure or Deed-in-Lieu of Foreclosure
  Both of these solutions affect credit the same. Sellers will take a hit of 200 to 300 points, depending on overall condition of credit. This means if a seller's FICO score before foreclosure was 680, it could dip as low as 380.
• Short Sale
  The effect of a short sale on a seller's credit report is identical to that of a foreclosure. The ding on credit will show up as a pre-foreclosure in redemption status, Steep says, which will result in a loss of 200 to 300 points. This means a short sale with a previous FICO of 720 will see it fall from 520 to 420.

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Recent college graduate with a credit consolidation concentration.