These days more homeowners are facing the tough decision about whether foreclosing is their only option. Deciding to allow a bank to foreclose on your home will have an effect on your family and your credit for the remainder of your life.
When you can no longer make payments to a lender for a home, the lender may repossess a home by foreclosing on it. Under normal circumstances they would then resell it, to recover a part of the amount owed on the defaulted home.
The implications of foreclosure may remain the rest of your life.
A few of the effects of foreclosure are:
1. Future application for a mortgage will require you to reveal a previous foreclosure, which will greatly affect your mortgage rates
2. A foreclosure listed on a credit report is nearly impossible to have repaired and will most likely remain a permanent mark on your credit report. Your credit scores will be significantly lowered, sometimes by more than 300 points. This will likely effect all of your future credit possibilities.
3. Most employers nowadays conduct a credit check. With your credit score lowered due to a foreclosure, this may also prevent any future employment opportunities. This is especially true of many government positions, including military and law enforcement agencies.
4. If your current employer runs a credit check (which is typically done if a promotion is offered), then a foreclosure could possibly put your current position in jeopardy
5. In order to recuperate money they did not receive during a bank sale of the property, a lender may seek a deficiency judgment against you to obtain the balance
6. There could be tax implications. Your lender can issue you a 1099 for the losses incurred by the mortgage holder as a result of the foreclosure. While it is important to confirm this with an accountant, you could have to pay taxes based on what your lender has included on the 1099.
7. You may be responsible for deficiencies after the foreclosure for an undetermined time period, placing you in a prolonged cycle of continued collections.
A short sale process may be the better way out.