What is a Foreclosure, how will it affect my credit?
Failing to make your mortgage payments will result in an “NOD”, or notice of default. This is a notice to let you know that the bank is in the process of filing legal action against your property. If you do not resolve the default with the bank, they are going to repossess your home.
This procedure is known as a foreclosure, it ignored it will result in the loss of your home, additional fees such as legal or deficiency judgment against you personally for he loss to the lender.
What is the process in a foreclosure?
The process is straightforward, you come into a financial hardship, fall behind on your mortgage payments, and ultimately the lender gets your house back. Not matter what the reason lenders do not care why the payments are not made, they just want their money.
Once you miss the first payment, the lenders will file a 30-Day late notice with credit bureaus and your credit will take a substantial hit. They will begin to call you and send correspondences; you must not ignore these attempts to contact you.
Discuss options that may be available, most lenders do not want your home back they just want their money, so see if you can work out a repayment plan, or other agreement that is suitable for all parties involved. A forbearance program may allow you the time needed to get back on your feet and repay the outstanding default, while you are staying current on your payment.
Refining may be an option to foreclosure, if you can refinance the loans to more acceptable payments and terms then you can avoid the foreclosure process and keep your home. You will have to qualify for the loan so make sure that you do this prior to the default, or the negative affects of your credit will not allow you to refinance your home.
The last thing that you wan to do is not talk to your lender, and continue avoiding them to avoid paying your mortgage, the 60-day notice will come, and be reported. In some states it only takes 60-days late to begin the foreclosure process, other states may vary, check your local laws.
At 90-days in default you will, most case, get the “NOD” filed by the lender. Most states give you 30 days to make a payment, or appear in court or face the loss of your home. If you fail to act you fail to act on this or any other notice you home will likely be going to a foreclosure auction and the bank will attempt to sell your home to get their money back.
After the lender completes the foreclosure and you lose your home, your credit will take a huge negative hit. Your credit score will likely drop 100-200 points, and prevent you from borrowing money on credit for several years.