How long Does Foreclosure Affect Credit
A foreclosure is one of the most traumatic events that can take place in your credit history. So How long Does Foreclosure Affect Credit? Depending on what your credit was like before the foreclosure took place, this event can reduce your score by anywhere from 225 to 300 points. It also remains on your credit report for seven years. The good news is that if you start paying off your other obligations, such as a car loan, credit cards, and other debt, it is possible to resuscitate your credit score within three or four years to a point where you can get approved for a new mortgage with an interest rate that is not subprime. While a foreclosure does damage your credit significantly, it is just one item, so surrounding that item with positive information about your credit is a major step in the right direction.
How Long do Foreclosures Stay on a Credit Report?
There is really no reason to allow foreclosure to happen to your home or credit. It is true that, in the wake of the 2008 and 2009 collapse of the housing market, some of the bad loans that Canadian banks had issued went into default. However, this happened at a much lower rate in Canada in comparison to homeowners in the US. While regulations are in place that favor Canadian lenders, such as the requirement to refinance your loan every five to ten years instead of getting a 30-year guaranteed loan, as is the case in the US, lenders would rather have your money than your house every time. The foreclosure process is time consuming and often ends up with the bank receiving much less in money through the foreclosure auction process than it would if you paid your mortgage off over time. Even if the bank has to be patient and wait for your money, it is still preferable to foreclosure.
Foreclosure effect on credit
When you find yourself slipping into financial peril, you need to talk to your lender. The first sign that a mortgage payment will be late should prompt you to make that call. Lenders in Canada will work with you if you are proactive in the communication process. They won’t let you stop making payment altogether, but loan modifications and delays are possible. If you’ve lost your job, received a demotion, or are going to have to go on disability and receive reduced income for the near future, talk to your lender first.
Foreclosure Affects Credit Score
Will Foreclosure Affect Credit? If your home goes into foreclosure and you end up losing it to the bank, that stays on your credit report for seven years. A foreclosure is one of the most negative events that can appear on a credit report. While you can start improving your credit in as few as two years, if you take care of your other credit obligations, having that on your credit report can make it very difficult to obtain mortgage financing while that is still on your report. Obtaining a loan for a car and even opening new credit card accounts can be more difficult while your report still lists your foreclosure.
Amansad Financial has connections with investors and lenders who are willing to help you find alternatives to foreclosure. The possibility of losing your home and destroying your credit is a scary one, and the prospect often paralyzes people to the point where they simply do not talk to lenders until it is too late. Instead of being irresponsible with your credit, the better choice is to start taking care of your financial situation as soon as possible. Give one of Amansad’s customer service professionals a call today to get an individualized analysis of your loan’s situation and suggestions for how to proceed.
How a foreclosure affects credit
The good news is that there are many ways to avoid going into foreclosure. Lenders look at foreclosure as a last resort for a number of reasons. First, the process is lengthy, as homeowners have legal protections that give them a number of months to come up with the money to satisfy the loan. As that period goes by, the bank is not bringing in any money, and if you can find a way to start catching up and stay in touch with your lender, then you have an excellent chance to keep your home, so following some simple steps can make things much easier for you.
1. Talk to your lender when things start to look rocky.
People go through layoffs, and downsizing is a part of life. Lenders understand this, and if you talk to a representative as soon as you find out about this, you are much more likely to get a payment rearrangement. If you do receive this sort of accommodation, make sure that you keep up with the new schedule of payments, so calculate your situation before you talk to the bank. This sort of initiative makes you look responsible, and this will keep your level of trust up with the bank.
2. Start looking for other sources of mortgage financing.
Sometimes your situation worsens, and you can’t keep up with the new payment arrangement, and sometimes banks aren’t as willing to work with people who are going through tough times. If you find that this is the case with your loan, you’ll want to start looking around for new mortgage financing. Subprime lenders offer mortgages at higher rates, which will add to your costs. However, starting the loan over gives you time to get your life back together, and if you are having significant financial struggles now but see a way out in a few months, but your bank isn’t willing to work with you, this is another way to stay out of foreclosure.
3. Sell your home quickly
This can be tricky, especially if you end up having to make a “short” sale (for less than the amount that you owe on your mortgage). The bank has to approve your short sale, which can hamper your transaction. If you can sell the home for the balance due, or more, then you might think about doing that. If you don’t use a realtor, you make more money, because you’re saving that commission. Either way, finding someone to make a quick purchase on your home can keep you out of foreclosure.
4. Sell to your future landlord
Some investors will buy homes and then lease them back to the owner with the intent to sell it back. This sort of lease/buy-back program is becoming a popular way to help individuals avoid the turmoil of foreclosure. While you do temporarily lose ownership of your home, you don’t have to move out, and you have access to a way to start buying your home back. This is not an ideal solution, but it is definitely better to having a foreclosure wreck your credit for seven years.
Give us a call at Amansad Financial. Many of our clients who come to us with initial difficulty making mortgage payments end up keeping their homes and often ending up with a short term loan that helps them get back on their feet until they can go back to a traditional lender. We have access to a network of private lenders who can give you the financing to bring you current in your present loan or even pay it off entirely, becoming your new lender in the process. These solutions give you the time you need to clean up your financial situation without having to leave your home. After all, the sequence of foreclosure, auction and eviction is a terrible one to go through. Let us help by giving us a call today.