EFFECTS OF FORECLOSURE
If you are facing foreclosure it important that you fully understand how foreclosure can affect you moving forward; therefore, I have included an overview of what to expect following Foreclosure.
1. Loss of Equity – One of the worst things about losing a home in foreclosure is that you don’t get any return on the equity that you put into the home. In fact, foreclosing on a home can trigger a series of events that requires you to pay more money out of pocket to the Mortgage Lender as well as the IRS.
2. Credit Damage – Foreclosing on a home is the “atomic eruption” of credit events that can cause a credit drop close to 300 FICO points and remains visible on an individual’s credit for 7 -10 years. The unfortunate cycle is that it’s difficult to rebuild credit when you don’t have credit available to you. Rebuilding credit after foreclosure is a long tedious process.
3. Difficulty Relocating – After a foreclosure, banks will not lend you money on a mortgage for many years. In addition, renting a property can also prove challenging because Landlords traditional check credit history. Foreclosures and/or low credit applicants are often considered to Higher Risk Tenants and have difficulty getting approved.
4. Deficiency Judgment – A deficiency judgment happens if the foreclosure sale price is less than the amount remaining on the mortgage loan and the bank pursues the homeowner for the “deficiency” of the loan.
5. Issues with IRS – The unsatisfied debt (deficiency) in a foreclosure can be considered Cancellation of Debt Income, which is taxable by the IRS. This may be the worst income tax ever because it is a tax on money you never actually earned, touched, or spent. As always, the IRS retains the right to garnish your wages until the amount has been fully satisfied.
6. Loss of Purchasing Power – The damage caused to an individual’s credit by foreclosure directly affects their ability to buy a vehicle, fund hobbies, fund business opportunities, or apply for major credit cards or department store credit cards.
7. Employment Problems – Many jobs, especially those in financial fields, check credit history as well as background. Unfortunately, some jobs may disqualify a candidate due to foreclosure and/or a poor credit history.
Foreclosure has many significant and long-lasting effects. Unfortunately, many people ignore the idea of foreclosure until it is too late. The sooner you take action, the better your chances of preventing foreclosure. Don’t go it alone…Get help from a professional! If not from me, get help from someone!
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