The foreclosure moratorium ended last month, and the mortgage forbearance program is due to end around September. Experts predict that nearly one million homeowners are likely to be seriously delinquent by the end of this year. If you have signed up for one of the many government aid programs but are afraid of missing the 90-day past-due mark, here are a few consequences of foreclosure to consider.
1. Deficiency Judgment
When a house is in foreclosure, the total debt usually exceeds the money recovered from the foreclosure sale. The difference between the sale price and the money owed is called a deficiency.
Depending on your state’s law, the lender can seek a deficiency judgment under specific circumstances. While Wisconsin does not have an anti-deficiency law, the amount is limited to what’s considered the property’s fair market value. After seeking a deficiency judgment, lenders collect the remaining amount from standard collection methods like levying a bank account or garnishing wages.
2. Your Credit Score Takes a Hit
A foreclosure does damage to your credit score. The higher the score, the bigger the hit. For example, if your credit score is around 680, it will likely drop by 85 to 105 points. But if it is about 780, the score will drop by 140 to 160 points.
How much your credit score drops also depends on other factors like your credit history, late payments, and no payments. A poor credit score automatically causes an increase in interest rates on credit accounts. You are also likely to be denied loans.
3. Buying a New Home Becomes a Challenge
You can only apply for federally approved and USDA loans after three years after completing the foreclosure. Fannie Mae requires you to wait for seven years for conventional conforming loans unless you can prove that there have been extenuating circumstances. As for VA loans, the waiting period is two years from the completion of the foreclosure.
To apply for a home loan, you will have to rebuild your credit and make a substantial down payment.
4. Emotionally Challenging
Losing a home can be emotionally painful for a family. It soon becomes a downward spiral as they become less secure and are more likely to default on other debts. Children may have to change schools and find it hard to adjust from a spacious home to smaller living accommodations. There’s also the problem of facing the stigma attached to foreclosure.
What If We Can Offer a Better Alternative?
You can avoid foreclosure by selling your house to us. As leading cash home buyers in Milwaukee, we buy homes irrespective of their condition. Call us at 414-435-2888 to sell any house fast in Milwaukee and for cash.