Many people see foreclosure as a final chapter in an unpleasant series of financial events, but the aftermath of foreclosure isn’t what you may hope for. If you no longer have the property, you no longer have the high payments, but there are other consequences that may await you.
Your personal feelings… Foreclosure might be a business decision for your lender, but for you and your family, leaving your home usually means leaving your neighborhood and your lifestyle. Adults tend to feel depressed, disappointed, and angry. For kids, this often means being uprooted from school mid-year and having to make friends and catch up in a new academic environment. If the financial strains leading up to foreclosure have broken up the marriage, both children and adults have an extra layer of hurt and disappointment to deal with.
Your new residence… Maybe your game plan is to move back home with mom and dad after you lose a home, but if you want to rent somewhere, you’ll need to find a place to live where the landlord is sympathetic to your situation. If you are jobless, this poses an obvious impediment. Assuming you have enough income to pay the rent, you may have to come up with a larger-than-normal deposit to put the landlord’s concerns to rest. Getting the deposit together, often a challenge for people anyway, is more difficult when you are cash strapped after a foreclosure.
Credit score implications… You are probably aware that your credit score will take a hit with foreclosure on your record, but be forewarned that other creditors may raise you rates, even if you are up to date with them. Many people tend to be behind in many accounts, especially if they have let other things go in an attempt to cover the mortgage. The resulting low credit score may make it hard to buy a car or get reasonable credit down the line.
Future home buying… Buying a home in the future will be more difficult with a foreclosure on your record. Even if you have an otherwise good credit record, you will probably have to wait five years to be eligible for a Fannie Mae backed loan or three years for an FHA backed one. In either case, you might be able to speed things up if you can prove that there were extenuating circumstances that lead to the foreclosure. You will still have to prove that you have been on time with things since the foreclosure.
Job consequences… These days, many employers get credit checks on new employees. If you are applying for position where you will be handling money, you might be turned down for the job based on your credit history. Even for a sales job, the employer might think you’ll be under too much pressure. You should address the subject in an interview to negate employer concerns. There are laws that limit the types of checks employers can do, but if don’t get the job after you’ve had a foreclosure, it’s hard to prove that the credit report was the reason you didn’t get it.
You may still owe… Once your home has been foreclosed on (or you’ve walked away) the lender may bill you for taxes on the amount they couldn’t recover from the sale, while the IRS may hold you responsible for debt on the property that was forgiven. Recent laws may give you some relief but make sure to check with a tax adviser to gauge your liability.
When foreclosure looms, the best bet is to assess the situation and determine how to gain control of it. For some people, this may mean talking to the lender or a financial counselor to negotiate a loan modification. For others, it may mean a short sale, where leaving the property will be more on your terms. There is another way: you can sell your house for cash to a reputable firm.
Express Homebuyers, which has operated in the DC area since 2003, can make you an offer, give you an advance so you can find a new home, and wrap up the sale within a couple weeks. To explore this exciting option, which can limit the impact of financial turmoil, call 1-(877) 804-5252 or email info@expresshomebuyers.com. We can answer your questions about a way to leave your troubled financial past behind you and move on to a better life.