Borrowers owing more than the worth of their homes have the opportunity of getting out from under. They are allowed to negotiate a short sale with their lender. However, short-sellers are often regarded as higher-risk borrowers. As a result of this, they find it hard to secure new loans.

What is a short sale? A short sale is a situation whereby a lender comes to an agreement to accept less than what is owed on a property. This will provide the borrower with the opportunity of walking away. Foreclosure can also be avoided in the process. As a result of this, a minimum amount of time exists before the short-seller is allowed to take another loan.

On the off chance that keeping your home is not even an option at all, a short sale makes it possible for you to escape the disturbing penalties connected with a foreclosure. In a short sale, the lender comes to an agreement, allowing you to sell the property or home for quite less than the amount owed.

Even though your liability has been released, your credit score will definitely be affected. The good thing about a short sale is that the effect on your credit score is not as severe when compared with a foreclosure. Notwithstanding, your score will still be lowered. It will likewise be on your report for nothing less than seven years.

This is just a minor setback. There is always a way out. It is still very possible for you to recover from a short sale and even turn into a homeowner once again. Some of the ways you can recover from a short sale include:

  • Secure a stable housing

You may be required to wait for at least a couple of years before you are qualified to apply for a mortgage loan once again. Secure a stable housing by renting another home or by staying with any of your relatives for the time being. If you plan to rent, you may be asked to pay a higher security deposit due to the short sale on your credit report.

  • Pay your bills on time

Setting your bills right on time, or as soon as you can also help in improving your credit score. Try as much as possible to keep your current accounts in a good state. This will lessen the short sale’s effect your credit history. Even though there is a variation in the particular amount of points a short sale will lower your credit score, however, someone with a couple of blemishes will feel a large drop as compared to an individual having a perfect credit.

  • Get a secured credit card

Obtaining a secured credit card makes it possible to re-establish your credit in case you do not possess loans or credit cards. Remember to set the spending limit with on your secured credit card. Also, your available credit limit must be equal to the deposit being paid. This deposit will be used as a collateral in case you default. It isn’t applied towards your balance.

  • Lower your debt-to-income ratio

Paying down your auto loans and credit card balances is a good way to lower your debt-to-income ratio. If buying a house is in your plans again, the lender is going to assess your debt with respect to your monthly income.

  • Save up a down payment

Lastly, try as much as possible to save up a down payment. With a down payment of about 20 percent or even more, you are able to cut down Fannie Mae’s time-wait penalty to two years from the actual seven.

All the aforementioned at things you can do to recover from a short sale.