It's no surprise that, with the slow economy over the last few years, many people across the country have felt the stress in the finances. Thousands of homeowners have found themselves in the unfortunate position of struggling to pay their bills every month, especially their mortgage. Now, they are facing a possible foreclosure. Have you ever wondered how a foreclosure will affect you?
First and foremost, your credit will get a huge hit. Your credit score can be hit as much as a 300-400 point deduction. Since lenders look at your credit score to determine what interest rate to charge you for a loan as well as whether you are credit worthy or not, this can be devastating. In fact, even if you had perfect credit (a FICO score of 850) before the foreclosure, a 400 point hit would make you an undesirable candidate to loan money to in just about any amount. You would be unable to buy a car or even to rent an apartment. And, a foreclosure stays on your credit report for as long as 7 years.
Even if the bank takes back your SLC home in foreclosure, you may still owe them money. They approved your loan based on the home's value at "X" amount of dollars. If your home sells in foreclosure for less than the amount owed, you could still be responsible for the difference. However, there are laws that vary from state to state to protect you from such a thing occurring. You may want to consult with a real estate attorney to see exactly what the laws are in your area.
There has been a surge of "strategic defaults" happening around the country lately. This happens when an investor decides that it will take too long for them to recoup their investment so they stop paying the mortgage on the property and walk away. This has taken place more over the last couple of years due to the sudden drop in home values. Many "flippers" have found that the home they purchased will be worth much less when they are through "flipping" it. Judges are now ordering deficiency judgments, where these investors must pay back any money owed to the lender.
Sometimes, no matter how much you want to pay your mortgage, you simply are not able to. If you find yourself coming up short every month, you should contact your mortgage company and be honest with them through written and verbal communication. They may have a viable alternative to foreclosure. Whatever you do, don't avoid that phone call from the lender. This will only hurt you.
If you have any questions on how a foreclosure will affect you, please visit the Utah Foreclosure Law website. If you are looking to sell your Salt Lake City or surrounding area home or wish to purchase one, don't hesitate to contact us!