Foreclosure? UPDATE#12

[Zydebearsmom]

My house may be going into foreclosure soon. I know that it stays on your credit for 7 years but how long did it take for your credit to start to get better? Were you ever able to eventually by another house? I read online that it would take bout 2 years for my credit to repair itself. I was just wondering if that was true.

 

[mistysue]

There are way too many factors for anybody to really answer that for you. I don't have personal experience. People talk about it like it will last forever, but I know that in the last 5 years BOTH of my next door neighbors have walked away from their homes. One house they just packed up, bought a new one and moved across town and waited. The bank moved in and HUD owned the house within 6 months- meaning they bought their new house while they were behind on payments. The other side, they bought a new house... It has been 3 years since I've seen them. They must have been current when they left, the bank only came and closed up the house a couple months ago.
Point being they both moved out and bought new houses while going through foreclosure.

Last fall I worked with somebody who in the previous five years had foreclose on several properties, filed bankruptcy and already bought another home.

On the flip side, my DH has ONE late payment left on his currently otherwise flawless credit report and needed me to cosign his car. (I honestly think it's due to a middle eastern name)

So it might only take you a couple years, but honestly if you are foreclosing right now, do you have some reason to think you will be able to afford another home within a few years? Will you be able to have a down payment? The rules about PMI changed last year, you will now have to pay it for the life of the loan not just until you are down below 80% value. I am not trying to pick on you, just hope that you aren't setting yourself up for another disaster if your plan is to foreclose and buy again. Both for your own good and for the good of those around you. I'm sorry, but my life has been torn up by other's being irresponsible and inconsiderate about this specific topic.

 

[goingtowdwwithkiddos]

First why is it going to foreclosure??? How late are you ? Do you have it listed at fair market value and tried for a short sale if you are upside down? Have you spoke to loss mitigation to see what can be done? I wish I knew then what I know now....... Assuming all of this is done and you are actually losing your house next part.


We lost a house to foreclosure and it took until it fell all the way off for credit to be easier to get. Prior to it falling off we had trouble even getting a car loan with a decent down payment. For years literally the most credit card credit we could qualify for were under 1000. We used them and paid off monthly but it did not seem to help much. when we did get cars our interest was super high. We had more cash than credit for 7 years. It took closer to 12 year for our credit to really be good.....As we were not able to really build it until Past the 7 mark.

I am thankful I was still young and had time but would seriously avoid a foreclosure at ALL cost possible.

 

[Colleen27]

I wouldn't count on being able to get any significant credit for the full 7 years. We have some friends going through this now and even 5 years after the fact they can't get approved for a credit card much less a mortgage. They were trying for a mortgage with 50% down, to buy again while prices are still low, and can't even do that. They had to open a secured credit card to start rebuilding and who knows how long it will take before they can actually get a home loan.

 

[aliceindisneyland]

Family members did a foreclosure AND a bankruptcy about 4 yrs ago and they're closing on a house this month - only paying about 4% interest, so not crazy high. We did a short sale last year and our credit is already over 700 and climbing back steadily. FWIW our Realtor said 2 years for foreclosure/short sale/bankruptcy now is typical "buy again" window - he said if only people who sold their homes [without financial issue] were able to buy homes he'd go broke.

 

[DetroitDisney]

I work in credit/mortgages.

There isnt really a timeline on how long it will take for your credit SCORE to improve. It depends on too many things. If immediately after the foreclosure, you are making multiple on time debt payments (for other things that report to your credit), you will see it steadily increase.

Generally you cannot purchase another home for 7 years after a foreclosure if you want a standard conventional loan. You can get an FHA loan 3 years after a foreclosure, but they suck hard, and you need PERFECT credit for the 3 years after the foreclosure. And I mean perfect.

If you can short-sale the home instead of foreclosing, you generally only have to wait two years, so it is much preferred.

Ask your mortgage company for a modification.

 

[trip]

http://creditboards.com/forums has loads of information.

 

[DetroitDisney]

I work in credit/mortgages.

There isnt really a timeline on how long it will take for your credit SCORE to improve. It depends on too many things. If immediately after the foreclosure, you are making multiple on time debt payments (for other things that report to your credit), you will see it steadily increase.

Generally you cannot purchase another home for 7 years after a foreclosure if you want a standard conventional loan. You can get an FHA loan 3 years after a foreclosure, but they suck hard, and you need PERFECT credit for the 3 years after the foreclosure. And I mean perfect.

If you can short-sale the home instead of foreclosing, you generally only have to wait two years, so it is much preferred.

Ask your mortgage company for a modification.

And by the way, when I say FHA sucks, here is an example. If you get a 30yr FHA loan today at 4.25%, they make you pay PMI equal to 1.35%, meaning your rate is really a 5.60%. Yep.

 

[tvguy]

Houses don't always go into foreclosure.
Our neighbors were prepared for that, but the bank had a clause in their mortgage, that allowed the bank to garnish the wife's wages. The bank didn't want the house, they wanted the money. Ultimately they were forced into a short sale.

 

[Shelly F - Ohio]

Don't forget if you do a short sale it has tax implications. You have to pay taxes on the difference. say you owe 150,000 on the mortgage and the short sale goes through for 100,000 you now have 50,000 dollars that you have just pocketed although you received no money. The fact that you did not have to pay the difference of the short sale means you gained 50,000 of a forgiven loan which is taxable. So be prepared to have to claim that as income and pay taxes next year on .

 

[crisi]

For a few years the tax code permitted you not to have to pay the taxes on a short sale - it was something we did to help out with the crash and the scale of foreclosures - that provision expired on January 1 though. So if you hear "my sister's cousin's friend didn't have to pay taxes" she might not have - but if you do it after January 1, 2014, you will, unless Congress puts the provision back.

 

[Zydebearsmom]

OP HERE...I am not behind on my payments. I have been in my house for 13 years. I am just in a lose lose situation right now. My husbands son was just abandoned by his mom. He was left with one of her family members. Well something happened in the sate that they lived in and DFACS got involved. He is currently in foster care and the only way we will be able to get him is if we have a large enough home for him. Right now we only have 2 bedrooms. When I first bought my house it was just me and my daughter. Well since then I am now married with 3 kids. My 2 daughters share a room and my son sleeps in my room. We have been trying to sell the house we are in but have been unsuccessful because of the market plus the neighborhood has really gone down hill since my purchase. We have tried renting it out but their are so many rentals in my neighborhood that has not worked out either so far. Anyways the social worker is giving us 90 days to find adequate housing or he will have to stay in foster care. I love my house and my credit but I love my family also. I am just weighing my options at this point. Even after we get him for the first year they will be coming to the house doing visits, so we have to provide something stable for him. We need an additional 3 bedrooms. UGH...Yes I can afford it I am only still in my current residence because I cannot sale it. I owe about $80,000 for it but it is only worth $45000. I just don't know what to do.

 

[adisneymama]

Have you looked into renting something yourself? It doesn't have to be fancy but you could probably find something big enough. What about one of the rentals in your current neighborhood? Then rent your current house out as soon as possible. A lease isn't permanent and after all is squared away and finalized with your stepson you might be in a different situation.

 

[Colleen27]

Is there a possibility of buying a new home now, before resolving what to do with the old one (and before the disposition of the house has a chance to effect your credit)? We did this with our old house and ended up selling the old house on a rent-to-own arrangement that set it apart as a rental (we credited a percentage of rent paid towards the purchase price) and helped us to attract a stable, serious tenant. If we hadn't been able to sell, we were prepared to short sale the house or, worst case scenario, let it go to foreclosure, but because we were already settled in our new home it wasn't the big risk that it would have been to deal with the old house before finding/buying the new.

It is a hard decision to make to place other priorities above honoring a commitment, not to mention preserving your credit rating, but if that is what it takes to keep your whole family together it is an option that at least merits consideration.

 

[Zydebearsmom]

I do not plan on buying another home anytime soon. I have been looking into rentals. I do not really have the desire to be a home owner again right now. So renting would be good for us right now. I am just concerned as to when I would be able to buy another one. My credit is good. Mortgage, credit cards, car loan and student loans all paid on time. I am kind of scared I do not know if they would try to garnish my wages or not. But again I am just weighing my options I have a 90 day deadline. I just wouldn't know how to tell my husband that his son has to stay in foster care.

 

[Colleen27]

I do not plan on buying another home anytime soon. I have been looking into rentals. I do not really have the desire to be a home owner again right now. So renting would be good for us right now. I am just concerned as to when I would be able to buy another one. My credit is good. Mortgage, credit cards, car loan and student loans all paid on time. I am kind of scared I do not know if they would try to garnish my wages or not. But again I am just weighing my options I have a 90 day deadline. I just wouldn't know how to tell my husband that his son has to stay in foster care.

You'll have to read your loan documents to answer that. The impression I've gotten is that most traditional first mortgages have only the recourse of reclaiming the collateral (the home) but that second mortgages, home equity lines, and some of the "creative" loans being written before the housing crash give lenders more collection options.

 

[pixiewings71]

can you take out am equity loan and add on to your existing home?

 

[lastminutemom]

You have to do whatever it takes to get that child out of foster care, so could you rent out your current home and rent a larger home.

Do you know what homes like yours are renting for in your area?

 

[Gracie09]

I would rent out the current home, even for as much as you can get, even if it's a little short each month and try a rent a three bedroom somewhere. One room for boys, one for girls and one for you and your husband

 

[MSLRAC]

You'll have to read your loan documents to answer that. The impression I've gotten is that most traditional first mortgages have only the recourse of reclaiming the collateral (the home) but that second mortgages, home equity lines, and some of the "creative" loans being written before the housing crash give lenders more collection options.

It also depends on state laws. Many states only allow for garnishments for back taxes and child support.

I would rent out the current home, even for as much as you can get, even if it's a little short each month and try a rent a three bedroom somewhere. One room for boys, one for girls and one for you and your husband

This would be my suggestion too. We rented our first house for $250 a month less than the mortgage payment for almost 2 years before we got it sold. It wasn't ideal but it worked.