Question 1

How does a short sale affect my credit compared to a foreclosure?

Accepted Answer

Both actions negatively impact your credit, but a short sale generally causes less damage (-50 to -125 points) compared to a foreclosure (-100 to -250+ points). More importantly, a short sale is reported as 'settled for less than full balance', whereas a foreclosure is a public judgment that remains on record for 7 years.

Question 2

What is a deficiency judgment?

Accepted Answer

A deficiency judgment is a court order allowing a lender to collect the remaining balance on a mortgage if the home sells at foreclosure or short sale for less than the total outstanding debt. In many states, this is prohibited for primary residences, but allowed in others.

Short sale or let it foreclose — what's actually worse?