What I’ve Been Up To

Ask Jean Thursday: Don’t Sell Yourself Short

My boyfriend and I are looking to relocate from Chicago to San Diego as soon as possible. The new position will offer a 5% increase in salary to begin with and yearly raises in salary after that. The only problem is that my boyfriend owns a condo that he owes approx. $120,000 and is only worth about $80,000. We are considering doing a short sale to get rid of the property. My boyfriend is the only person that owns the home and his credit is what would be affected. He recently checked his FICO score which is 725. He is currently not late with any mortgage payments, or any payments for that matter. My questions are how will it realistically affect his credit and is the short sale our best option to rid ourselves of this house?

– Beth, Illinois

Here’s the downside of a short sale:  Your credit rating will likely suffer.   A short sale can take it down by 75 to 125 points.   The bank will report the account closed to the credit bureaus as well as the fact that the loan was not paid in full.  You can try to negotiate with the bank so that it will report a more positive scenario to the bureaus (this does happen) but make sure that you get it in writing.  Why is this important?  If you and your boyfriend are thinking of buying a home in your new town, unless you can qualify for the mortgage in your name alone, the interest rate of the mortgage will be based on both of your credit scores. If you are thinking of buying together, you may want to see if you can rent the condo and cover the costs of ownership.  Then you could sell the place after you’ve made your next purchase — or if renting out the condo turns profitable, not sell the condo at all.