how bad is foreclosure really?

[beerlover]

I'm not planning to go this route, but assuming my house doesn't sell in a few months, I won't be able to pay for two mortgages (I'm moving)... If it goes into foreclosure, how bad is that really? I mean, I know people who have filed bankruptcy and then like two years later they have new cars and a new house and all that. So how bad is it really if your house is foreclosed on?

 

[kom526]

Would hiring a management company and renting it out be a viable option for you? You could do a rent to own type deal with the tenants.:shrug:

 

[Mojo]

I'm not planning to go this route, but assuming my house doesn't sell in a few months, I won't be able to pay for two mortgages (I'm moving)... If it goes into foreclosure, how bad is that really? I mean, I know people who have filed bankruptcy and then like two years later they have new cars and a new house and all that. So how bad is it really if your house is foreclosed on?

Quit spending all your money on beer

 

[Vince]

I'm not planning to go this route, but assuming my house doesn't sell in a few months, I won't be able to pay for two mortgages (I'm moving)... If it goes into foreclosure, how bad is that really? I mean, I know people who have filed bankruptcy and then like two years later they have new cars and a new house and all that. So how bad is it really if your house is foreclosed on?

They must be paying cash for the new car and house. Because with bankruptcy, you don't get any credit, loans, etc. for something like 5 years unless the laws have changed. A friend of mine filed for bankruptcy and it was cash only for like 5 years.

 

[beerlover]

I'm going on the assumption that my house will sell before I have to even move in 3 weeks.... (Optimist). But I'm just wondering what the worst case scenario would be. I'm not sure I could get anyone to rent this house because the prices/values have dropped and I know they could get an equivalent house for much less rent than I would have to charge to cover the mortgage. That's what I get for buying at the peak of the bubble!

The bankruptcy thing - I know several people who filed and within 2 years of paying it off got a mortgage and car loans and credit cards and everything. Bankruptcy is worse than foreclosure and stays on the credit report for longer.

I'm just going to price my house low and hope for the best because I have to leave and I'll need a house where I'm moving. Say I dump the house and take like a $50K loss on it -- then I would have to get a loan for $50K to pay off the mortgage company for the difference, correct? I'm just trying to hope for the best yet plan for the worst.... This isn't the greatest market for a quick sale.

 

[redhotmomma]

It sucks. We were suppose to close on our house 2 weeks after we move her and then found out we had a lien on the house. We didn't have the money to go to court to get it released. The title company we closed with just went out of busy when we got the contract on our house. we went into foreclosure in January and still waiting for the matter to get resolved. Mortgage company said they wont make us pay back the loan but i haven't go that in writing yet. Worse part i bought the house from my Mom.

 

[Vince]

Thats not true, there are plenty of High Interest Credit Card companies that specialize in establishing Credit after Bankruptcy, Capitol One has ads targeted directly to those that have filed.

Once you've established your credit through one of those (doesnt take much) its fairly easy to get a better rate on Car loans or other secured type of item.

Recent development. Didn't have it about 10 years ago.

 

[sckald]

I would advise against Bankrupcy at all costs. Having worked for a lender I can tell you that a hit like that to your credit in this market is just about the worst thing that can happen. You'ld be better off to speak with a REALTOR about a Short Sale. Your property would be sold for less than what you owe but the lender won't have you over the barrel for the differnce.

 

[beerlover]

Yeah, I'm not planning to file bankruptcy. I hope to sell the house for enough to pay it all off and move on cleanly. I'm moving in 3 weeks and leaving the wife and kids here for now while the house is on the market. But, around early August or maybe late July I'll have to have the family move with me to set up residency in the new place for school registration and all that. At that time, I won't have enough money to keep on paying for the house here (if it hasn't sold) and also a new place at the new location. Then comes the short sale or outright abandonment as a last resort. I'll leave the house on the market until the bitter end if it doesn't sell. How long will it take for the mortgage company to get to the actual foreclosure if I stop paying after July? I know they initiate the proceedings after about 2 or 3 missed payments, but how long until they actually come for the keys?

 

[CalvertNewbie]

I would advise against Bankrupcy at all costs. Having worked for a lender I can tell you that a hit like that to your credit in this market is just about the worst thing that can happen. You'ld be better off to speak with a REALTOR about a Short Sale. Your property would be sold for less than what you owe but the lender won't have you over the barrel for the differnce.

Question for you (or anyone else) - doesn't a short sale also have a pretty negative effect on your credit? And does the IRS consider the amount that the lender "writes off" to be income for you for that tax year, and hit you at tax time? I've heard so many different things about short sales.

We're in a similar situation. We couldn't sell our house in NY and only lived there for about 8 months so we'd be lucky to even break even when we sell it. Luckily, we found renters for the time being but once their lease is up if we can't find new renters, we can't pay both mortgages for too long. We had to for 3 months until we found our current renters and it was hell.

 

[blondie4512]

I know a couple who haven't made their mortgage payments in over a year and still have their house... The banks are really holding out right now on forclosures, I have read this on cnn money too... Short sales do leave a bad mark on you credit but not as bad as a foreclosure... I also know people who have had property forclosed on and turned around and bought a couple years later... Same with bankruptcy...

 

[awpitt]

Bankruptcy is worse than foreclosure and stays on the credit report for longer.

Not exactly. Bankruptcies ussually involve unsecured debts while forclosure involve secured debt. Lenders know this. They also know how credit card companies shower people with ads for teaser rates and get them roped in. A bankruptcy on a credit report is more commen than most of us would guess. So it's not uncommen for someone being able to obtain credit less than three years after the bankrupcy has been discharged. On the other hand, foreclosures indicate that the borrower doesn't pay there primary bill (housing). So it's looked upon more negatively than a bankruptcy which represents mostly unsecured (credit card) debt.