No one ever wants to experience a foreclosure. Not only is it an incredibly difficult and stressful experience for the homeowners, but there are lasting negative impacts that can ripple across many aspects of your life for years. It is important to understand the full effects of a foreclosure and to prepare financially for it should it ever happen to you.
Down South Florida Home Buyers is here to listen to you and can address any questions you may have about your specific circumstances and what you can do to avoid these ramifications. Just call (239) 766-6225 .
Immediate Financial Impact Of A Foreclosure
The severity of the drop in credit score due to a foreclosure depends on the individual‘s credit rating prior to the foreclosure, but can range from a drop of anywhere from 85–160 points or more. Experian, Equifax, and TransUnion, the three main credit bureaus, will all record the foreclosure so that it appears on any credit report. This means that any potential lenders can see that a foreclosure is listed and may lead to the loan or credit request being denied.
The foreclosure will remain on your credit report for a number of years, usually up to seven. During this period, it will be difficult to reestablish good credit, as lenders are likely to view you as a high–risk customer. The damage to your credit score can last even longer than seven years if lenders identify your foreclosure as a risk when deciding whether to approve additional credit applications.
Not only will the foreclosure damage your credit score and impact your ability to obtain loans in the future, but it will also have an immediate financial impact on your income or savings. During a foreclosure, payments are missed and late fees are given, which can add up and put a strain on your finances. Additionally, if foreclosure proceedings are prolonged or extended, you may even be required to pay additional legal fees and penalties.
Additionally, the mortgage holder may require any remaining debt to be paid off in full in the event of a foreclosure. If you are unable to pay off the debt, you could be taken to court for the collection of this debt which could lead to wage garnishment or a lien on your home.
Potential Loss Of Retirement Savings
Dipping into your retirement savings should be seen as a last resort, as this can be detrimental to your retirement funds due to the associated taxes and penalties. In addition, if you don‘t have enough money set aside, then it could mean that you won‘t have the necessary funds you need when you reach retirement age. Therefore, it‘s important to assess all your options when it comes to covering the remaining debt from the foreclosure so you don‘t have to rely on your retirement savings as a solution. It‘s also wise to start making an emergency fund to prepare for any future financial difficulties. With this fund, you‘ll have the financial security to be able to support yourself without having to dip into your retirement savings.
Creating an emergency fund and assessing your options is important in terms of avoiding the use of your retirement fund. However, if you‘re already in a financial bind and require an immediate solution to cover the outstanding debt, then taking a loan or seeking assistance from organizations such as a local charity or government program can be beneficial. Additionally, you may also consider refinancing your home loan in order to acquire the extra funds to cover the remaining debt. It’s important to remember to be aware of the fees associated with these solutions, as they may decrease what you‘re able to save for retirement.
Difficulty Finding Future Housing
In the event of a foreclosure, it may be difficult to find a home in the future. According to the Urban Institute, roughly 25 percent of people who face a foreclosure enter into another foreclosure within seven years. This means those individuals may be seen as higher risk tenants or applicants for a new home loan. Potential landlords may be unwilling to accept an application from someone with a past foreclosure, even if they have their financial situation in order. If a rental property is sought, finding one from a non–traditional landlord or company might be necessary. Being approved for a mortgage may be even more difficult after a foreclosure and could be unlikely unless the credit score and other financial aspects are improved substantially. With a foreclosure, people may have to wait much longer for approval for a loan as their credit score suffers heavily due to the foreclosure.
Stress And Anxiety
Facing a foreclosure is an incredibly stressful experience. This stress and anxiety can follow you long after the foreclosure has been completed. Dealing with a foreclosure can result in prolonged periods of depression and deeply affect your quality of life. It is important to seek the necessary support to manage the emotional toll of dealing with a foreclosure.
No one ever wants to face a foreclosure, but unfortunately it is a reality for many people. It is important to be aware of the financial and emotional impacts that a foreclosure may have on your life. It can be difficult to manage alone, so it’s important to seek out the necessary support. By knowing the potential impacts of a foreclosure, you can better prepare financially for if or when it happens.
Facing the possibilities of a Delray Beach foreclosure alone can be very stressful and inaction on your part risks your financial future. Don’t wait until foreclosure begins, let Down South Florida Home Buyers help lessen your burdens today. Send us a message or give us a call today at (239) 766-6225 .