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?
hi roni,
you cannot simply take over the mortgage payments. your friend will have to quitclaim the property to you and then you will have to refinance. once you refinance, you can directly make the payments to the lender.
if the property goes into foreclosure, then his property will be sold off by the lender and any deficient amount resulting from the sale of the property should be paid by him to the lender. moreover, a foreclosure will also lower your friend's credit score by 250 points.
you cannot simply take over the mortgage payments. your friend will have to quitclaim the property to you and then you will have to refinance. once you refinance, you can directly make the payments to the lender.
if the property goes into foreclosure, then his property will be sold off by the lender and any deficient amount resulting from the sale of the property should be paid by him to the lender. moreover, a foreclosure will also lower your friend's credit score by 250 points.
My boyfriend just had a foreclosure on his record at the end of Summer 2008, had I known we were going to want to buy a home together now I wouldn't have let that foreclosure happen if I could of stopped it.It is super hard to get qualified now...I was wondering even though he makes really good money & with a credit score of 608 can he help me in some way on getting into a house?I have a score of 720 but make just a few thousand less to get a loan.Help me!!
Hi Casei,
I don't think the lender will allow him to be a co-signer for the loan that you take. In that case, your boyfriend will not be able to help you in getting a loan. You will have to contact a person who has a good income and ask him/her to be the co-signer for your loan.
Thanks
I don't think the lender will allow him to be a co-signer for the loan that you take. In that case, your boyfriend will not be able to help you in getting a loan. You will have to contact a person who has a good income and ask him/her to be the co-signer for your loan.
Thanks
This is great I was thinking about letting my property go into foreclsoure so that I could move. I have not been able to sell it, and I am getting tired of paying for a property which I am barely able to afford and on top of that I am not even there 3 times out of the week, most months.
Hi Twin,
Letting the property go into foreclosure is not a good option in my opinion. There are various options which you can go for in order to avoid foreclosure. You can check out those options and try to negotiate with the lender.
As you do not mind losing the property, you can either apply for a short sale or a deed in lieu. However, you should note that in both the cases, you will have to delinquent on the payments. If you are not past due on your payments, the lender will not accept your request for a short sale or a deed in lieu.
In both short sale and deed in lieu, the lender will sell off your property in order to recover the debts. The deficient amount resulting from the property is forgiven in case of deed in lieu whereas in case of a short sale you will have to pay that amount to the lender.
Thanks
Letting the property go into foreclosure is not a good option in my opinion. There are various options which you can go for in order to avoid foreclosure. You can check out those options and try to negotiate with the lender.
As you do not mind losing the property, you can either apply for a short sale or a deed in lieu. However, you should note that in both the cases, you will have to delinquent on the payments. If you are not past due on your payments, the lender will not accept your request for a short sale or a deed in lieu.
In both short sale and deed in lieu, the lender will sell off your property in order to recover the debts. The deficient amount resulting from the property is forgiven in case of deed in lieu whereas in case of a short sale you will have to pay that amount to the lender.
Thanks
Recently I was divorced the mortgage was in my name only, I signed a quick claim deed on the morgage so she could get a morgage on the property within 9 months. I justreceived in the mail the mortgage co. is forclosing!! What can I do?? My divorce attorney was not looking out for my best interest & never explained this especially being stuck into the quick claim deed for 9 months the house will be gone, my ex wife lives their with her boyfriend & had 13 months before the divorce was final as I paid the mortgage payments. What can I do???
ONE LAWYER SAYS I SHOULD HAVE A TRUST SET UP TO CONVEY MY CONDO TO MY PARTNER, AND MINE TO HER (ADD OUR NAMES TO EACH OTHERS DEED.) THE CONCOS WERE BOTH PURCHASED AT THE SAME TIME, FOR THE SAME AMOUNT. WE SHOULD HAVE HAD NAMES ON, WHEN WE GOT FINANCED, BUT DIDN'T. OTHER LAWYER SAYS A LIFE ESTATE WILL DO. WE HAVE ONLY OWNED THE PROPERTIES FOR 2 YRS. BOTH ARE IN FLOIDA. WHICH WOULD BE BEST?
Hi,
To sam!
If the mortgage is still in your name, then your credit will be badly affected if the property is foreclosed upon. You have signed the quitclaim deed which had removed your name from the property but not from the mortgage. You will have to contact the lender and check out if you can go for a short sale or a deed in lieu.
To JJ!
In my opinion, signing a quitclaim deed with life estate clause will help you in this situation.
Sussane
To sam!
If the mortgage is still in your name, then your credit will be badly affected if the property is foreclosed upon. You have signed the quitclaim deed which had removed your name from the property but not from the mortgage. You will have to contact the lender and check out if you can go for a short sale or a deed in lieu.
To JJ!
In my opinion, signing a quitclaim deed with life estate clause will help you in this situation.
Sussane
After foreclosure will they cet you car or anything else?
Hi cbmyster,
The lender cannot place liens on your personal property or take away your personal property due to a foreclosure.
Thanks
The lender cannot place liens on your personal property or take away your personal property due to a foreclosure.
Thanks
My home will be foreclose soon, but i have families who are all willing to help me and my family out. Will I be able to buy a home after two years (let's just say that I keep-up with my credit scores). What % interest will i get approve? :x
Hi anonymous,
I would suggest you to go for a short sale rather than a foreclosure. You can contact the lender and apply for a short sale. In a short sale, you will have to pay the deficient amount resulting from the sale of the property to the lender. However, a short sale will reduce your credit score by 75-100 points. After a short sale, you can wait for 2 years before applying for a loan. Once you apply for a loan, you'll receive normal rates.
Thanks
I would suggest you to go for a short sale rather than a foreclosure. You can contact the lender and apply for a short sale. In a short sale, you will have to pay the deficient amount resulting from the sale of the property to the lender. However, a short sale will reduce your credit score by 75-100 points. After a short sale, you can wait for 2 years before applying for a loan. Once you apply for a loan, you'll receive normal rates.
Thanks
Can a mortgage company take the money I do have in savings if I go into foreclosure?
Hi mbw,
Yes, the lender can garnish your savings account if you are unable to pay the deficient amount resulting from the foreclosure of the property.
Yes, the lender can garnish your savings account if you are unable to pay the deficient amount resulting from the foreclosure of the property.
my husband applied for credit and he was told our house was in foreclosure we have been late but its not in foreclosure would your credit report say that