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After the Minnesota Short Sale Closes {Seller Series}

Improve credit score after Minnesota short saleNow that we have talked about the reasons for a Minnesota short sale, the Minnesota short sale process and the negotiation and closing, it is time to talk about what happens after your Minnesota short sale closes. You will be able to get another mortgage in the future; in fact Fannie Mae allows you to apply for a new Minnesota mortgage 2 years after you have closed on your short sale. When you do a short sale your credit score will be lowered up to as much as 50 points, but within 12-18 months you should be able to raise your score if you follow the following tips.

1. Pay Bills On Time

Paying your car loan, student loan and credit card payments on time will help you to raise your credit score. By doing this you can show potential mortgage companies that making late payments on your mortgage and/or doing a short sale was an isolated incident and that you can pay your bills on time.

2. Establish New Rent History

Most people that sell their home on a short sale will rent a home or apartment after they sell their home. It is important to establish a good rental history right away. If you are renting from a private person keep copies of your cancelled checks so that you can prove that you paid your rent on time every month.

3. Lower Debt Load

Your credit score will go up if you get your ratio of balance owed to credit available first to 50% and then to 30%. This is for each account. For example, if you have a credit card that has an available credit limit of $1,000 and an $800 balance, first work towards getting the balance down to $500 (50%) and then to $300 (30%). Mortgage companies like to see that you can handle your current debts and aren’t overextending yourself.

4. Charge, Pay Off

If you don’t have any credit cards or any other loans, apply for a new credit card. If you can’t get an unsecured credit card, go to your local bank and get a secured credit card. Every month charge a little on the credit card and pay it off immediately when you get the bill. This will help mortgage companies see that you can successfully handle credit.

5. No New Credit

With the exception of number 4, don’t apply for new credit. It seems like every store these days will offer some sort of discount for applying for their store’s credit card. Don’t do it! The simple act of applying for multiple new credit cards will lower your credit score. Then having a lot of open lines of credit will lower your credit score.

By following the above tips, your credit score will recover from selling your Minnesota home on a short sale. If you apply for another mortgage you will show future mortgage companies that you can handle the payments of a mortgage, and that your short sale was an isolated incident that was due to circumstances that may have been out of your control.

This concludes our series, Selling a Short Sale in Minnesota. If you are looking for more information on selling your Minnesota home on a short sale, please contact us today. We can help you evaluate your situation and work with you to avoid a full Minnesota foreclosure.

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