Why Avoid Foreclosure

There are ways to avoid foreclosure. Some of those include:

1. You can work with your lender to refinance or modify your current mortgage payment.
2. You can sell your home with the equity you have.
3. If you do not have any equity in your home, you can work with your lender and negotiate a short sale on the property.

Why avoid foreclosure?

Foreclosure has a serious impact on your future ability to purchase another home. It remains a public record and can affect your credit history for 10 or more years. In addition to that, employers have a right to check your credit report and may use foreclosure as immediate grounds for reassignment or termination. A foreclosure may lower your score from 250 to 300 points for over 3 years. If you lose your home due to foreclosure, you will be ineligible for a Fannie Mae backed mortgage for 5 years.

Outside of a conviction of a felony, a foreclosure is the most challenging issue against a security clearance. If you are in a position that requires a security clearance, in many cases clearance will be revoked and your position will be terminated.  On many mortgage, rent, or credit application you will have to answer “yes” when asked if you were ever foreclosed upon. This can affect your future rates.

As mentioned above, if you do not have equity in your home, a short sale can be an option.  Here are some reasons why you might consider it a better option than foreclosure:

A short sale does not challenge most security clearances. It not routinely reported on your credit report and therefore it may not challenge your current or future employment. If you negotiate a successful short sale, generally you will be eligible for a Fannie Mae backed mortgage within two years. While a short sale can lower your credit score, it could be as little as 50 points and your score typically recovers faster than a foreclosure. People have been able to improve their score in as little as 12 to 18 months.

Both short sales and foreclosures have financial implications. In addition to consulting with an experienced real estate professional you should also consult with a tax person and/or an attorney prior to selecting either option. You may find the IRS web site useful as well.