How Your Home Can Ruin Your Credit

When you are having trouble making your mortgage payments, it can feel like you are stuck between a rock and a hard place. You want to keep your home, but you can no longer afford it. If you allow your home to be foreclosed upon, you are looking at your credit being ruined and having no chance of getting a loan for many years to come. However, you may be stuck in a down market and unable to sell your home for anywhere near as much as the mortgage balance. What do you do?

Having Trouble Paying a Mortgage Is Common

Before we get into how to stop foreclosure, it is helpful to look at why many people face foreclosure. Though it can be traumatic, it is often due to no fault of their own. Before buying a house, you should put down a significant down payment. Then, your mortgage payment should never be more than 25 percent of your monthly take home pay. You are inviting trouble if it is more.

Other ways homeowners may find themselves in a bind are due to

  • An increase in an adjustable interest rate mortgage leading to an inability to pay
  • Other debt obligations
  • Death in the family
  • Unexpected unemployment or job loss
  • Unexpected major home maintenance expense
  • Promotion denial or job demotion
  • Loss of second income through divorce
  • Medical emergency or sudden illness

Stopping a Foreclosure

Your options are quite limited once the lender has filed a Notice of Default. Before your fall behind on payments, it is better to take action. Once foreclosure proceedings have begun, your credit may take a hit and you have few options. If you absolutely cannot make the payments or you feel like the payments are suffocating you, you can

Consider a Short Sale You may be a candidate for a short sale if you home is worth less than the amount you owe. Though it is not as bad as a foreclosure, a short sale does affect your credit score. You have to get lender cooperation in order for this deal to go through. This can be a difficult process.

Sign a Deed-in-Lieu of Foreclosure The lender is deeded back the home in this instance. By giving the home to the lender, the foreclosure is canceled and the mortgage is forgiven. However, this has the same impact on your credit score as a foreclosure would.

Sell Your Home Elite House Buyer can sit with you and help you determine the market value of your home and ensure that your house sells quickly. We will help you avoid any dings to your credit score that could result from falling behind on your payments or being foreclosed upon. Call us today.

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