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?
very helpful information thanks sara
My fiance's home was in the forcloser process because his ex-wife was ordered to pay the mortgage and insurance while she resided there. He then purchased it out of the forcloser. Will the fact that it originally went into forcloser affect his credit
Welcome sweetpea,
If your fiance's name was not on the mortgage when the property was foreclosed upon, then his credit would not be affected in any way. However, if his name was on the mortgage, then his credit can get lowered by 250 points.
If your fiance's name was not on the mortgage when the property was foreclosed upon, then his credit would not be affected in any way. However, if his name was on the mortgage, then his credit can get lowered by 250 points.
if i foreclose on my home how will it affect my father who is the co borrower credit wise ?
Hi Guest,
As your father is the co-borrower of the mortgage, his credit report will be affected similarly as yours. Your father's credit score will go down by 250 points after the foreclosure. Moreover, he will not be able to qualify for a mortgage in the next 3-4 years. As a negative item, the foreclosure will remain on his credit report for 7 years.
As your father is the co-borrower of the mortgage, his credit report will be affected similarly as yours. Your father's credit score will go down by 250 points after the foreclosure. Moreover, he will not be able to qualify for a mortgage in the next 3-4 years. As a negative item, the foreclosure will remain on his credit report for 7 years.
Hello all-
Question: My name is the only one on the note. However, my name and my mother's name are on the deed? I am trying to short sale, and if not successful, I plan on doing a deed in lieu. I already know I will get a credit hit, but will my mother's credit get affected even though she is not on the mortgage note?
Question: My name is the only one on the note. However, my name and my mother's name are on the deed? I am trying to short sale, and if not successful, I plan on doing a deed in lieu. I already know I will get a credit hit, but will my mother's credit get affected even though she is not on the mortgage note?
Welcome nando,
As your mother's name is not on the mortgage docs, her credit score will not be ruined due to the deed in lieu of foreclosure. It is your credit score that would be ruined due to the deed in lieu of the property.
As your mother's name is not on the mortgage docs, her credit score will not be ruined due to the deed in lieu of foreclosure. It is your credit score that would be ruined due to the deed in lieu of the property.
My fiance is going through the foreclosure process. I have two children and excellent credit. If we marry before the house is forclosed, will it hurt my credit in any way? We want to do what's best financially.
not at all, dee. what's his is his until it becomes yours jointly, and you won't be taking a share in his dwelling, of course. you have no liability at all.
If filing a bankrupcy and the homestead is not included but gets forclosed shortly after anyways how will it be looked at, another big hit to credit and if in question should it be included in bankrupcy to atleast minimumize more damage to credit
Bankruptcy as a whole will affect your credit score and lower it. Whether there's a homestead on the property or not will have nothing to do with the credit affect after bankruptcy.
Hi, my question is: If I have had a foreclosure and the house has since been sold to another couple, If I was put on another morgage loan title (with my new spouse), can the old (foreclosure) company legally put a lien on or come after me for the foreclosure amount on the previous house?
My husband who is physician , just a stroke,affecting speech, not able to work, we are not able to pay on mortgage, planning to through foreclosure,does it affecting any personal assest,and also does matter if property is in trust.
thank
mu
thank
mu
I would like to take over someones mortgage loan, pay up what they are in default.Then get a quit claim to take over the property at a lower price. Can I do that?