Foreclosure: How Foreclosure Today Affects Your Finances Tomorrow

By Francine L. Huff
Mortgage Credit Problems Columnist

The number of homes going into foreclosure continues to climb as more homeowners struggle to make their mortgage payments. According to RealtyTrac, foreclosure filings in the U.S. rose 57% in March 2008 from a year earlier. If you have bad credit and can't pay your mortgage, consider how foreclosure will affect your finances in the future.

The Foreclosure Process

Lenders report missed mortgage payments to the credit bureaus. The more months you miss, the more your credit score will decline. You'll also be responsible for any late fees for missed payments. The foreclosure process will start when the lender files a Notice of Default (NOD). Most newspapers run lists and NODs are considered public records.

If you've received a Notice of Default and are still in the pre-foreclosure period, you have the option of paying off your mortgage or selling your home to raise the money to pay it off. If you think your bad credit can be helped by refinancing your mortgage, use the sign-up form to find a lender. If you can't pay off your loan, your home will be auctioned off or repossessed by your lender.

Making Bad Credit Worse

If you already have poor credit, having foreclosure proceedings start will make your situation even worse. Not only will it be difficult to save your home by refinancing it, but your credit score will take a big hit -- possibly even falling below 500 by the end of the whole process. You poor credit will also make if difficult to qualify for any new loans. A foreclosure filing will show up on your credit score for seven years. However, as you begin to repair your poor credit you eventually may be able to qualify for some types of loans before the end of that time.

Paying for Your Mistakes

Another consequence of foreclosure is that when you finally are able to get approved for a new loan again, you'll likely pay a higher interest rate than someone who has a higher credit score. That may happen whether you apply for a credit card, auto loan, or private student loan. It can even prevent you from getting certain jobs or insurance coverage.

Get the Help You Need

If you're having trouble paying your mortgage, contact your lender to set up some kind of arrangement to avoid foreclosure. The earlier you move to solve your problems the more likely your lender may be willing to work with you.

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About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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