will a short sale affect my credit
Yes absolutley, but likely less than a foreclosure and certainly less than a bankruptcy. For example Fannie/Freddie currently allow you to buy another home just 2 years after a shortsale, vs 5 for a foreclosure.
It is unclear at this time how much “better” your credit will be with a short sale v. foreclosure. ?However, with a short sale you will most likely be left with a deficiency judgement. ?So, even if your credit is “better” sooner, that $60K unsecured debt that used to be the second on what used to be your home is certainly going to drag your credit score down.
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DO NOT complete a short sale unless your lender(s) will provide a full release, IN WRITING. ?Do not rely on anyone’s advice that, “they usually don’t pursue it.”
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Try to modify your loan. ?If your lender is going to have to sell your home, they might as well sell it to you at or near current?market?value. ?They would get no more from a new buyer and they would incur NO marketing or sales expenses by modifying your note. ?Work with them, not against them.