Is Foreclosure Threating Your Credit Score?

If your mortgage payments have become unaffordable, or you’ve recently taken a financial hit that will affect your ability to pay the mortgage, you probably have a lot on your mind. Your next financial moves will affect you for many years to come, so having a solid, informed plan can save you a lot of stress in the near and distant future.

Anyone who is facing foreclosure should understand exactly what its implications are, and what other options are available. If you are behind on mortgage payments and do not see a way to catch up, avoiding foreclosure can help you recover your finances more quickly. Short sales and deeds-in-lieu are two dignified alternatives that more and more homeowners are using to avoid the financial impact of foreclosure.

One incredibly important benefit of these foreclosure alternatives is their lesser impact on your credit score. “I have personally seen a short sale only lower credit scores by as little as 50 points, as opposed to the 250 to 300 point drop from a foreclosure,” said Alex Charfen, CEO of the Distressed Property Institute. Additionally, the credit effects of a short sale can be as brief as 12 to 18 months, whereas a foreclosure will typically impact your credit score for more than three years.

Specifics

A short sale is when the lender agrees for theproperty to be sold at a price lower than the mortgage balance owed. A deed-in-lieu is when the lender receives the house deed in place of the mortgage balance, although in some cases the lender will still pursue the homeowner for the leftover mortgage balance, which is called a deficiency judgment.

In today’s economy, banks and lenders are forced by market competition to make increasingly quick lending decisions, which means they must rely more heavily on credit scores to decide whether you will be approved for a loan, how much of a down payment will be required, what your interest rates will be, etc.

Whether you eventually intend to buy a car or house, take out a loan or use a credit card, minimizing the damage to your credit score through a foreclosure alternative can benefit you in the long run. Just because your current house is unaffordable doesn’t mean you should forget the idea of owning an affordable house in the near future. However, this possibility will hinge heavily on how you deal with your current mortgage.

A short sale is not specifically reported on credit histories. Foreclosure is reported for at least 10 years, which means that when future employers check your credit history, they will see the foreclosure as a negative on your report. Beyond the credit benefits of a short sale, it is important to know that you may be eligible for $3,000 in borrower relocation assistance from the HAFA Program to complete a short sale or deed-inlieu, which could help with moving costs and a more smooth transition into your future dwelling.

As you can see, a short sale may allow you to sidestep some of the damaging effects of foreclosure. There are multiple factors that influence your credit score, a crucial one being timely payments of your most recent bills. This means that if you can no longer afford your mortgage, it is important to act quickly. By successfully completing a short sale or deed-inlieu, your credit score may be less damaged than in a foreclosure, which would allow you to recover more quickly and move on with your life. For that reason alone, you deserve to find out if a short sale will work for your situation. Contact me today so that we can assess your situation and figure out your best possible options.

As a CDPEdesignated agent, I have been extensively trained in the full range of foreclosure alternatives for distressed homeowners, and I’m ready to help you get started on a path to a more stable tomorrow.

Making Mn Homes Affordable – Are You Eligible?

What in the World is HAFA

Who is Eligible for HAFA?

How to Apply for HAFA

Details of HAFA

HAFA – FAQ – For Minnesota Homeowners

I believe every homeowner deserves the best information and education to avoid losing their home to a foreclosure and damaging credit for years to come. If you are struggling to pay the mortgage and unsure of what to do next, understanding these options-especially short sales– can ease your stress and potentially save you from a impending foreclosure. Deciding on which route will be best for you and your family’s future is the most important decision you can make. Please use this information to better understand the options available. As a CDPE, I have been specifically trained to assist homeowners in these difficult situations. If i can provide you with more information and assistance, please do let me know and don’t hesitate to contact me directly.

Richard McDeid

Our Home Real Estate

Call/text: (763) 443-6680