After a homeowner moves on from a shortsale or a foreclosure, certain differences may be seen once again. For example, when a consumer is planning to apply for a loan, certain questions may be asked about foreclosures.
When filling out loan applications, no questions are asked about short sales and consumers are able to report that their home was sold. However, a common question on loan applications is: “Have you ever had a property foreclosed upon or given a deed in lieu thereof in the past 7 years.” Consumers have to answer these questions truthfully, since lying on an application can result in FBI investigation for mortgage fraud. Of course, when consumers note that they have gone through a foreclosure within the past 7 years, most loans end up being denied.
Short sale transactions and foreclosures have many differences, which should always be carefully considered before making a decision between the two. It is often an excellent idea for consumers to seek tax and legal advice before making the final decision to avoid facing serious consequences in the future.