Being in a stressful financial situation or having distressed personal circumstances can be a real drain on your life. In order to get on with your life, you need to change the situation. Ignoring the problem will not make it go away. Love Texas Houses can help you by making a cash offer if you want to sell your property to our business. In this way, we work to alleviate immediate financial concerns for our clients.
Here, we provide links to several organizations that can help you take that next step. Even if you do not sell your house to Love Texas Houses, we hope that you use these resources to get help. Although we advise our clients as best we can, we are not lawyers, tax professionals or counselors, so we encourage anyone in financial or emotional distress to take that first step and contact the organizations listed below.
How Is Your Credit Impacted By A Foreclosure?
The most damaging outcome of falling behind on mortgage payments is being foreclosed upon. A homeowner needs to do absolutely everything possible to avoid this from happening.
What Makes Up Your Credit Score?
Your FICO (Fair Isaac Corporation: the largest and best known of several companies that provide software for calculating a person’s credit score) score is determined by the following:
- Your payment history – whether you have any late payments on your mortgage, loans or credit cards
- Amount owed – the amount you owe on any loans or credit facilities
- Credit history length – the length of time that you have being using credit
- New Credit – any applications for new loans or credit
- Types of credit – different types of credit for example, mortgage, car loan, credit card
Your payment history and the amount you owe on mortgages, loans or credit cards have the highest impact on your credit score
When Will Your Credit Start To Be Impacted?
Every month, mortgage lenders report payments that are late by 30 days or more to the three credit bureaus. This means that your credit is already being impacted long before the foreclosure process begins. Typically, mortgage lenders wait for payments that are 90 days late before they start the foreclosure process. The process itself also takes several months. By the time the foreclosure date arrives, your credit could already be significantly impacted due to additional late payments. It is critical that late payments are stopped as soon as possible, because things get worse as time goes by.
How Long Does Foreclosure Affect Your Credit?
After your home is foreclosed, your credit score will drop significantly. The higher your current credit score, the bigger the drop in your score. According to FICO, your credit score could drop by as much as 160 points if you have an excellent credit score now. If you have a good credit score now, you could see a 100 point drop in your score.
If the foreclosure is a one-time event and your credit is otherwise in good standing you can recover your credit more quickly, but it could still take three to seven years to recover.
Having a lower credit score can mean higher interest rates and possibly not being able to get any loans or credit at all, making it more difficult to recover financially.
Getting Another Mortgage After A Foreclosure
One of the consequences of a foreclosure is that you now need to buy a new home. This means that you may need a new mortgage. Getting a new mortgage may prove to be difficult, if not impossible, after a foreclosure. Most lenders will require a waiting period, and typically require a credit score above 620.
Typically it takes 5 to 7 years after a foreclosure before lenders would consider a new mortgage loan.
One of the best options for obtaining a mortgage after foreclosure is with a federally insured FHA loan. Three years is the minimum time required between the completion of foreclosure until approval of an FHA loan, regardless of any extenuating circumstances. FHA borrowers also still have to prove good bill-paying habits since the foreclosure.
Tax Consequences Of A Foreclosure
The impact on your credit score is typically understood by most homeowners when a foreclosure takes place. Another negative consequence of a foreclosure is that it may result in taxes due to the IRS. Most homeowners do not realize that when you lose your home due to a foreclosure, there may be taxes due just as if you sold the house.
While it’s common to hear about the credit consequences of foreclosure, not everyone considers the tax consequences. A foreclosure brings about a property title transfer and subsequent tax assessment. Most property owners do not realize that by losing their home to foreclosure, there are likely going to be tax implications.
This is a complicated subject and you are advised to consult a tax specialist regarding this issue.
A JOURNEY OF A THOUSAND MILES BEGINS WITH THE FIRST STEP.
YOU HAVE TO TAKE THAT FIRST STEP. USE THE RESOURCES ON THIS PAGE TO GET HELP
There is Hope After Foreclosure
Although the impact of a foreclosure can be catastrophic, you can recover. It will take some time. It may be painful and difficult, and you will have to prove that you are financially responsible, but it can be done.
Many homeowners have experienced a foreclosure or some other devastating life event and have gone on to fully recover their financial well-being.
We encourage you to do your own research to find organizations that can help you recover your financial stability. We also provide a list of organizations that can help guide you back to financial peace of mind.
Love Texas Houses are in no way affiliated with any of the organizations, companies or persons we offer as resources, and do not endorse their use in any way. We merely aim to provide a starting point in your search for financial help.