Posted on: 24th May, 2006 07:15am
When you fail to pay back the mortgage and you're not offered a workout plan to continue payments, chances are that the property may be foreclosed. Foreclosure involves the lender taking away your property and selling it off at an auction in order to recover the unpaid mortgage debt.
However, if the market isn't good enough and the sale price comes out to be lower than the balance you owe, then you may have to pay the deficiency (difference between the sale price and what you owe).
However, if the market isn't good enough and the sale price comes out to be lower than the balance you owe, then you may have to pay the deficiency (difference between the sale price and what you owe).
How does foreclosure affect credit?
When it comes to foreclosure, most people are concerned about how foreclosure affects on credit rating. This is because until and unless one is able to rebuild credit after foreclosure, he will not be able to get credit/loans at better rates of interest. If the financial markets are not good enough, one may not even be approved for any type of credit or mortgage.
Moreover, if your credit isn't good, you won't be able to secure a job in case you're looking for a new one. Therefore, prior to a foreclosure, you should be aware of how foreclosure affects your credit score.
Foreclosure affects your credit score by 250 points. That is, if you have a credit score of 680, it will drop down to 430. So, it's better to avoid a foreclosure and request the lender for a loss mitigation plan so that you're able to keep the home or if at all you can't keep the home, then at least see that your credit doesn't get a big hit.
Moreover, if your credit isn't good, you won't be able to secure a job in case you're looking for a new one. Therefore, prior to a foreclosure, you should be aware of how foreclosure affects your credit score.
Foreclosure affects your credit score by 250 points. That is, if you have a credit score of 680, it will drop down to 430. So, it's better to avoid a foreclosure and request the lender for a loss mitigation plan so that you're able to keep the home or if at all you can't keep the home, then at least see that your credit doesn't get a big hit.
Foreclosure: How long will it affect credit?
Like any other negative item, a foreclosure stays on your credit report for 7 years. However, foreclosure affects your credit score predominantly for the first 2 years. But, once you start rebuilding your credit, it gets better with time, though it'll take almost 2-4 years to get a mortgage after foreclosure, that too at comparatively better rates of interest.
How can you repair credit after foreclosure?
Here are 3 tips to help you repair credit after foreclosure.
- Prepare a budget: Look at the way you spend your money. Plan a budget and try to follow it. Understand why your home was foreclosed. If there's anything that you could have avoided, try to fix it now. Track if you are spending extra and adjust your budget accordingly. Use the Simple Budgeting tool and prepare a well-planned budget.
- Pay your bills on time: Keep paying your bills and debts in time and make sure your creditors report them to the credit bureaus. If required, take help of a credit counselor or avail debt management plan in order to reduce your debt burden. This is because high debt load will affect your credit score and bring it down. Don't ignore small expenses as otherwise they can be sent for collections.
- Get a credit card: You can apply for credit cards and use it to make small purchases. But pay off the balance in full every month. This will reflect that you can manage credit responsibly thereby borrowing only what you can afford and paying it back in time. However, go for a credit card only if you have adjusted your expenses.
If you were quit claimed on to a property and are not on the loan. If the property get foreclosed on will this effect your credit? Will a forecoseure show up on your credit report? And how do you find out if the other person on the title who does carry the loan has missed payments and may be near a default?
My fiancee has a mortgage on a condo that is more than what it is worth. We are able to make the monthly payments, but due to the devaluation of the property and the insane HOA fee ($266 a month and now they want to levy a special assessment of $6,000 for each unit); he would rather just get out now. What would be the best course of action? Is there a way to get out this place without ruining his credit? The odds are it won't sell, or if it does, for a significant amount less...plus we don't have the extra cash laying around to pay the special assessment if it is not voted down so I presume that would end up being a lien against him (we live in Arizona). Any suggestions on how to get out of this place with minimal (finanacial & credit) damage?
Welcome serenity,
You can contact the lender and check out the option of short sale. If the lender accepts short sale, your credit will be lowered by at least 75-100 points. To know more about short sale, check out the information available here.
You can also try out the option of loan modification. In this process, you will get a alternate payment plan with which you can pay off the debts.
You can contact the lender and check out the option of short sale. If the lender accepts short sale, your credit will be lowered by at least 75-100 points. To know more about short sale, check out the information available here.
You can also try out the option of loan modification. In this process, you will get a alternate payment plan with which you can pay off the debts.
if i default on a mortgage in my name, will my wife's credit suffer?
Hello dkjgdsjgh,
Sorry to hear that you are facing an option of defaulting on your mortgage.
If your wife's name is not on the mortgage than her credit will not be affected.
You did not mention if you have contacted your lender to see what options you may qualify for to not loose your home.
You need to speak to someone within the Loss Mitigation department of your lender. This department will be able to tell you about several workout options to prevent a default on your mortgage. These workout options include a repayment plan, a loan modification, short sale, special forbearance, etc.
Let us know if you still have questions. You may visit home-buddies.com and review a free mortgage resolution guide that is available.
Good luck. :D
Sorry to hear that you are facing an option of defaulting on your mortgage.
If your wife's name is not on the mortgage than her credit will not be affected.
You did not mention if you have contacted your lender to see what options you may qualify for to not loose your home.
You need to speak to someone within the Loss Mitigation department of your lender. This department will be able to tell you about several workout options to prevent a default on your mortgage. These workout options include a repayment plan, a loan modification, short sale, special forbearance, etc.
Let us know if you still have questions. You may visit home-buddies.com and review a free mortgage resolution guide that is available.
Good luck. :D
Hello,
Thank you for this forum, I have learned a lot form it already!
My Wife and I bought a house in May 2006. Since that time we consistently pay $175 over the actual mortgage payment. We now owe $208,000 on our mortgage, and the market value of the house is worth around $170,000. The house is in need of some substantial repairs (new furnace, new roof, Windows, etc.), and money is very tight. The mortgage is in both of our names now, but my question is can I get it transferred to just my name? That way if it becomes impossible to pay only my credit would be affected? BTW, we live in MN if that helps.
Thank you in advance.
Thank you for this forum, I have learned a lot form it already!
My Wife and I bought a house in May 2006. Since that time we consistently pay $175 over the actual mortgage payment. We now owe $208,000 on our mortgage, and the market value of the house is worth around $170,000. The house is in need of some substantial repairs (new furnace, new roof, Windows, etc.), and money is very tight. The mortgage is in both of our names now, but my question is can I get it transferred to just my name? That way if it becomes impossible to pay only my credit would be affected? BTW, we live in MN if that helps.
Thank you in advance.
Welcome JS,
In order to transfer the mortgage in your name, you will have to refinance it. Yes, if the mortgage is in your name and if you default on payments, it is your credit that will be affected.
In order to transfer the mortgage in your name, you will have to refinance it. Yes, if the mortgage is in your name and if you default on payments, it is your credit that will be affected.
I went into business with my uncle and he left me with all the properties to take care of. Now I can't afford it. 3 are vacant, in need of serious repairs. If I were to let them go into foreclosure would that be 1 hit or 3 hits on my credit report for each house?
Welcome Kina,
I think it will be considered as 3 separate hits in your credit report. But did you check the various options to stop the lender from foreclosing the property? Check the following link to know more about avoiding foreclosure:
http://www.mortgagefit.com/foreclosure/17ways-avoid.html
I think it will be considered as 3 separate hits in your credit report. But did you check the various options to stop the lender from foreclosing the property? Check the following link to know more about avoiding foreclosure:
http://www.mortgagefit.com/foreclosure/17ways-avoid.html
I have a problem I hope someone can offer some advice on. I am upside down in my house. I bought it at the peak and it's probably worth 100K less than what I bought it for. It's a 1 BR, old home that needs work so the probability of selling it is slim to none. I will need to move to take care of ailing parents which will mean leaving my job. I have worked hard all my life to keep my credit in excellent condition. I hate to go into foreclosure and I don't think my parents will want to get involved in this home. My mother was a real estate broker and couldn't believe I bought it. I'm at a loss. I do the right thing for my parents and end up ruining my credit for years. I'm 53 so it's not like I have 30 years to build it back up. Also, I want to buy a house back where I live now later down the road. Do any of you wise people have any suggestions. I would be forever grateful.
Hi Jerry,
Thank you for the information. I will read the info on the link you sent. I called my lender a while back and they said they couldn't help me because I was current on my payments.
What a twisted system we have.
Thank you for the information. I will read the info on the link you sent. I called my lender a while back and they said they couldn't help me because I was current on my payments.
What a twisted system we have.
Hi 1animalfan,
Yes, its true that if you are not late on the payments, the lender will not agree for a short sale, deed in lieu or a loan modification. I would suggest you to negotiate with the lender and try to convince him about the hardship that you are facing. That might help you.
Thanks
Yes, its true that if you are not late on the payments, the lender will not agree for a short sale, deed in lieu or a loan modification. I would suggest you to negotiate with the lender and try to convince him about the hardship that you are facing. That might help you.
Thanks
We live in So CA and purchased in 2005 (20% down, fixed rate) and now we are considerably upsidedown on our mortgage. We would like to purchase a 2nd home, and rent our current, but can't qualify for a 2nd mortage due to our lack of equity. Would Quitclaiming our home to our LLC remove our mortgage from our credit reports?
Hi val,
A quitclaim does not remove the mortgage from your house. Neither does it remove the mortgage from your credit report. I don't think you should try to purchase a second home when you can't pay off the first. Are you sure the rental payments would be enough to pay for the first mortgage?
A quitclaim does not remove the mortgage from your house. Neither does it remove the mortgage from your credit report. I don't think you should try to purchase a second home when you can't pay off the first. Are you sure the rental payments would be enough to pay for the first mortgage?
Have a friend who is in trouble with their Mortgage and needs to sell fast, but cant. They asked me if I could take over the payments and do a quit claim. If I do this, the property is not really mine, is it? Will I receive credit with credit reporting agencies for the payments I make? Would I make the payments directly to the Mortgage Company, or to my friend? If so, what if he lets it go into foreclosure?