Timeshare Default -Shows as a Foreclosure!
A borrower recently contacted me about purchasing a home in Maryland. After discussing her needs, I reviewed her credit.
She has a timeshare owned jointly with her ex that he has not made payments on it since about 4 months after they purchased it (almost 2 years ago). She was very surprised to find that her credit report is showing the default as a "Foreclosure; Real Estate Mortgage".
If it is coded on the credit report as a foreclosure, both Fannie Mae and Freddie Mac (conventional financing) view it as they would any other foreclosure. A foreclosure means that it could be 7 years before being eligible for conventional financing.
Should I Buy A Timeshare? You may have a place to stay for 2 weeks a year, but you may not be able to buy a home! The monthly payment and maintenance fees are counted in your debt ratio. Default (stop making the payments) and it could show as a foreclosure on your credit report, meaning potentially no loan, or a less desireable loan.
FHA to the Rescue!
As of this writing, this will not disqualify her for a new mortgage if she is using FHA financing. The good news for this borrower is that FHA views this as unpaid consumer debt and not a foreclosure, no matter how it is coded on the credit report.
7 YEARS to wait to buy a first home because buying a timeshare vacation spot? Is it worth it? Think twice before buying that timeshare, and certainly before you choose to stop paying on it. Get all the facts and be sure you make an informed decision.
Timeshare Default -Shows as a Foreclosure!
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