Do you have questions about home foreclosures? Are you considering buying a home and wondering if you go through foreclosure now will it affect your home-buying ability later?

If you want to buy a home in the future, it's crucial to avoid foreclosure, as it can severely impact your credit report and whether you can qualify for a new mortgage to buy a home. 

We want to help you understand foreclosure and provide tips and options to move forward in your home ownership dreams.

How a Foreclosure Affects Your Credit Report

Understanding how foreclosure impacts your credit report is the first step since the effects on your credit start before the foreclosure process begins. 

A foreclosure is issued when you have defaulted on your mortgage loan, which means you've missed payments for at least four months. These missed payments show up on your credit profile, negatively affecting your credit score, sometimes dropping it by 100 points. 

So, once you reach the point of foreclosure, your credit score has already been reduced significantly. The foreclosure is then placed on your credit profile, and it takes seven years to remove it from your credit report. When a foreclosure is legitimate, there is no way to remove this negative mark from your credit record.  

A foreclosure also places a waiting period on your ability to qualify for certain types of mortgages, such as conventional, FHA, and VA loans. With these types of loans, the waiting period ranges from 2-7 years. There are some situations where a lender can decide to waive the waiting period, but you’ll have to provide a significant amount of documentation to prove a hardship.

Avoiding a Foreclosure as the Most Effective Solution

When you come face to face with a foreclosure, it's important to carefully consider your options. Act at an early stage when your account first starts to fall behind in order to have your best chance at avoiding foreclosure. Here are a few tips to consider:

• Talk to your mortgage lender to develop a payment plan that helps you recover from the overdue debt. 

• If you are in a difficult financial situation, make an appointment with your loan manager and explain the situation. They might be able to assist you with temporary payment arrangements until you get back on your feet. 

Consider selling to a cash home buyer

When you are facing foreclosure, think about the option of selling your home to a cash buyer. 

When a home goes into foreclosure, the lender typically sells it at an auction for a much lower price than you could. Selling to a cash buyer will likely get you much more than how much the foreclosure will recover for your property. 

Also, a cash buyer can be much easier than going through a foreclosure, helping you sell the home fast. A cash sale can help you get out from under the burden of your mortgage, giving you a fresh start.

Key Takeaways

If you’re facing a foreclosure, the negative impact on your credit can be significant. You may wonder whether you’ll be able to buy a house in the future if foreclosure happens. While possible, it can take many years to restore your credit, so it’s best to avoid foreclosure altogether.

A foreclosure brings about difficult times, but you can reach out to us at Manifest. We can help protect your credit and relieve some financial stress so a new home won’t be out of reach.