In case there is a foreclosure situation in your locality, you must know what effects foreclosure can have on your credit report. Foreclosure activity usually starts off within 3-4 months after a homeowner has defaulted on his payments. In case the lender is able to foreclose a property and get it sold in an auction at a price that is lower than what the homeowner needs to repay, then the lender can ask the homeowner for deficiency judgment. This deficiency judgment will reflect on the homeowner’s credit report.
Another impact that the foreclosure can have on the credit report of the homeowner is that the amount which was not retrieved by the foreclosure sale activity will be taken as a forgiven debt. This will be treated like income, wherein the homeowner will have to bear the income tax on this amount. In such a situation, the homeowner can always take advice from a professional tax advisor.
Foreclosure makes your credit score dip heavily. Bad credit will make it difficult for you to buy a home in the future. In order to avoid foreclosure on your property, you must make timely payments on your mortgage and loans to be safe.