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 sat,
If you have been late in your mortgage payments, then it would be mentioned in your credit report. However, until the lender forecloses the property, it wouldn't be mentioned in your credit report.
If you have been late in your mortgage payments, then it would be mentioned in your credit report. However, until the lender forecloses the property, it wouldn't be mentioned in your credit report.
I am married for just over 2 years I have worked for 13 months of the 2 years of marriage my husband took out a mortgege 10 months ago my name is not on the mortgege and we are now going to divorce can i claim anything from that house or do i get nothing please help thank you
Hi suzanne,
You have mentioned that your name is not on the mortgage. But does your name appear on the property deed? If yes, then you can claim a certain portions of the property. However, I would suggest you to take some legal advice on this issue.
You have mentioned that your name is not on the mortgage. But does your name appear on the property deed? If yes, then you can claim a certain portions of the property. However, I would suggest you to take some legal advice on this issue.
I was on a mortgage with my exwife in 2006. I was removed from that original mortgage and placed only on the deed shortly after. I have checked my credit recently, and all mortgages have been closed on my credit report. I recently checked our public county records and it shows that she is now going into foreclosure and there has been an Assignment of Mortgage. This is also in my name. Does this make sense? To have an Assignment of Mortgage if it's not even showing up on my credit? What should I do?
Hi ajm,
If your name is not on the mortgage docs, then you will not be liable for the mortgage. The lender will not be able to sue you for the deficient amount. You should contact your lender and clarify the issue.
Thanks
If your name is not on the mortgage docs, then you will not be liable for the mortgage. The lender will not be able to sue you for the deficient amount. You should contact your lender and clarify the issue.
Thanks
can i quite claim myself off of a deed to avoid a deficiency judgment in the state of florida if the property is already in foreclosure? I am not on the note.
my parents added me to the deed on their house. they also transfered the deed on a piece of land to me. they are doing this so they do not have to do a will in case anything happened to them. my house is currently upside down, the loan will adjust to a higher interest soon i will not be able to afford the payments, and i can not get it refinance. if my lender does not have a workout plan for me and my house gets foreclosed on, can my lender come after my parents house and/or land to collect my unpaid obligations on my foreclosed home? can i sign a quit claim on the house and transfer back the deed on the land to my parents? can my lender still come after my parents properties after i signed quit claims?
Sorry - posted on the wrong forum.
Welcome Guest,
If the lender forecloses the property, then he has the right to come after your other properties in order to recover the deficient amount resulting from the sale of the property. If your parents have already transferred the property to you, then the lender can place lien on that property.
If you transfer the property to your parents only to save it from your creditors, it will be considered as a fraudulent transfer and you'll be penalized for it.
If the lender forecloses the property, then he has the right to come after your other properties in order to recover the deficient amount resulting from the sale of the property. If your parents have already transferred the property to you, then the lender can place lien on that property.
If you transfer the property to your parents only to save it from your creditors, it will be considered as a fraudulent transfer and you'll be penalized for it.
how long does a quick claim become valid after it is signed
Hi mary,
A quitclaim deed becomes valid when you notarize and record the deed at the county recorder's office.
Thanks
A quitclaim deed becomes valid when you notarize and record the deed at the county recorder's office.
Thanks
My husband I experienced a foreclosure 2years ago. We understand the foreclosure will affect our credit for 7-10years, but the lender is showing an open debt of $35k, which I'm assuming is the difference of what we originally owed vs what the house was sold for. (It was sold last year). Is it anyway to have the amount not show as open debt?
Hi guest,
You will have to settle the debt with your lender. You can go for some payment plan with your lender so that you can pay off the debt. Once you pay off the debt, the lender will report it as "paid as agreed".
You will have to settle the debt with your lender. You can go for some payment plan with your lender so that you can pay off the debt. Once you pay off the debt, the lender will report it as "paid as agreed".
Hi, 16 mo. my mother was unable to make her mortgage due to the death of my brother of which whom my mother cared for. My now ex stepped in to help save the house and my moms credit. He had a verbal agreement with my mom, that he pay the mo. mortgage and assume full responsibilty untill the sale of the house. the deed is in both his and my name. He has now decided that he no longer wants the responsibility of the house. The house is in default and will forclose at the end of this mo. hewil ll
Hi, 16 mo. my mother was unable to make her mortgage due to the death of my brother of which whom my mother cared for. My now ex stepped in to help save the house and my moms credit. He had a verbal agreement with my mom, that he pay the mo. mortgage and assume full responsibilty untill the sale of the house. the deed is in both his and my name. He has now decided that he no longer wants the responsibility of the house. The house is in default and will forclose at the end of this mo. hewil ll