How Low Will My Credit Drop After a Short Sale or Foreclosure?

How Low Will My Credit Drop After a Short Sale or Foreclosure?

With credit scores, one can easily predict the possibility of you making payments on time, paying off loans, and helping a lender determine whether you are a risk. Credit scores are determined by an individual’s lending history and ability to repay and manage debts based on the agreement. Factors like letting your mortgage payment slide, failure to make timely payments tend to affect your credit score. There is every tendency for your credit score to be impacted if you suffer a foreclosure or short sale, which will, in turn, make you a potential risk for a lender.

If you are thinking of taking a short sale or foreclosure for your home, after reading this, you will become aware of how much your credit score could drop. However, at this point, it is necessary to consider the meaning of short sale and foreclosure

 

WHAT IS A SHORT SALE?

With a short sale, you have the opportunity of selling your home and using the gains or proceeds from the sale to pay off your mortgage irrespective of whether the profits don’t make up the full balance. When you attempt to sell your home for even less than you owe in a short sale, the lender earns the proceeds. Not every lender will be open to the idea of a short sale, and homeowners have to be at least 90 days late for the lender to be open to that idea. In some cases, lenders might choose to forgive the unpaid balance on the mortgage or not. In some states, certain laws allow lenders to seek deficiency judgments, which ensure that you pay the difference between the balance due on the mortgage and the sale price.

 

WHAT IS A FORECLOSURE?

There is every chance for you to be faced with a foreclosure when you fail to make your mortgage payments, and the lender chooses to seize and sell your property in other to make up for their financial losses. It takes a lender four missed payments to result in foreclosure proceedings. The foreclosure process tends to vary by state, but if you are going to be faced with a foreclosure, then you would receive a notice most likely through a mail.

 

HOW LOW A SHORT SALE CAN REDUCE YOUR CREDIT SCORE

A short sale will most likely affect your credit score and not just by a small margin. It is capable of dropping it to as low as 100-150 points and that depends on where you started; your credit score will only fall more based on how high it was. Short sales are regarded as the worst things that can affect your credit score. Credit scores tend to range from 300 to 850; for example, if you have your credit score between the range of 750-800, it can easily reduce to 150 points or lower in a short sale. If you are within the range of 650-720, after a short sale, you could lose 100 points and fall into what is commonly referred to among lenders as the subprime category.

 

HOW LOW A FORECLOSURE COULD REDUCE YOUR CREDIT SCORE

Foreclosures tend to have more effect on credit scores. Now according to FICO, based on a person’s starting scores, a fair number of homeowners who go through a foreclosure experience a drop in their credit score from between 85 and 160 points. An individual with a good starting score of 680 could reduce to between the ranges of 579 and 594, which is regarded as a fair or poor score range, and someone with an excellent score of 780 may reduce between 620 and 642. Foreclosures can affect a consumer’s credit for as long as seven years.

It is necessary to understand this because a low credit score can make it difficult or impossible to borrow. Plus, as your credit scores drop, your interest rate will only continue to increase even if you are eligible for credit loans.

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Foreclosure Rescue Scams Are Out There – BEWARE!

Foreclosure Rescue Scams Are Out There - BEWARE!

Foreclosure Rescue Scams Are Out There – BEWARE!

Washington, as well as other areas, have a growing problem of foreclosure rescue and mortgage modification scams that could cost you thousands of dollars OR your home should you fall victim. Scammers will usually make promises they can’t keep such as ensuring GUARANTEES of certain outcomes for a fee and/or pretending they have direct contact with your mortgage servicer.

If you think you may be a victim of one of these kinds of scams, file a complaint NOW.

To help you avoid such scams follow these tips:

If you see/hear promises to save your home and lower your mortgage or debt payment, beware of con artists. If you are struggling to pay your mortgage, keep these tips in mind:

On your own or with help from a HUD-approved housing counseling agency, you can apply to the federal Making Home Affordable (MHA) program.  For more information call 888-995-HOPE.

ONLY your mortgage servicer can grant a loan modification. This is how you know it’s impossible for a third party to guarantee or pre-approve your HAMP mortgage modification application.

If they want you to pay a fee upfront, beware. In most cases, charging fees in advance of a mortgage modification is actually illegal. Paying a third party won’t improve your likelihood of receiving a mortgage modification anyway.

If an individual or company claims to be affiliated with HAMP or has a logo or some display representing themselves as such, check out the said connection by calling the Homeowner’s HOPE Hotline at 888-995-HOPE.

Also, be leery of anyone that offers money-back guarantees.

ESPECIALLY beware of anyone who advises you to discontinue contact with your mortgage servicer or to stop making mortgage payments.

Never sign over the deed to your property to any individual or organization unless you are working directly with your mortgage company to forgive your debt.

SEE ALSO:

What to Expect in a Bank-Owned Home

With the New Year Comes New Federal Laws Protecting Home Owners

With the New Year Comes New Federal Laws Protecting Home Owners

Just after 2014 barely arrived, with it a number of new federal rules in the mortgage and foreclosure context did too. The Dodd-Frank Wall Street Reform and Consumer Protection Act are responsible for the changes taking effect. The Dodd-Frank Act provided authority to the Consumer Financial Protection Bureau to issue rules to implement the changes. Take a look at this sampling of the many changes:

 Dual Tracking is Done

Mortgage lenders and services have been practicing dual tracking a lot in recent years. Dual tracking is where a bank considers a homeowner’s application for a loan modification while simultaneously going through with a foreclosure on their home. Federal law now prohibits this.

Mortgages Now Have ATR StandardsWith the New Year Comes New Federal Laws Protecting Home Owners

ATR (ability to pay) are standards that a loan applicant must meet to show their ability to repay a loan. Through much of the 2000s, loans were being granted left and right without numbers being run to see if applicants could actually afford them. Mortgage rates would often increase or balloon payments came to low rate loans after a few years inevitably causing home owners to default on their loan and lose their home through foreclosure. As of January 10, The CFPB has implemented rules requiring mortgage lenders to adhere to ATR requirements.

New Protections For High Cost Mortgages

Protection is provided to borrowers of loans with high interest rates or fees. The Dodd-Frank Act expanded these protections set by the Home Ownership and Equity Protection Act. For details, see here.

Other Requirements for Mortgage Servicers

The CFPB put a whole bunch more rules into action protecting mortgage holders, those shopping for mortgages, and those staring at the face of foreclosure. The rules require mortgage servicers to do the following:

-provide monthly billing statements to borrowers

-notify borrowers of adjustable rate loans when the interest rate changes

-credit mortgage payments promptly

-provide alternatives to force placed insurance

-quickly resolve mistakes and quickly respond to requests of borrowers, and

-contact borrowers who fall behind in their payments.

Guest Blog post by Edmonds Criminal Attorney Ryder Law Office.

 

Bankruptcy Filings are Dropping Across the Nation

Bankruptcy Filings are Dropping Across the Nation

Bankruptcies, both of personal and business nature, continued to steadily drop throughout 2013 across the nation. This is both shocking and interesting as bankruptcies were actually predicted to rise by at least 8% in 2013. Business bankruptcies in particular, actually dropped 24%. This is the lowest they’ve been since 2006 and this trend is expected to continue through this new year of 2014.Bankruptcy Filings are Dropping Across the Nation

2012 filings showed double digit reductions in many states across the nation. Arizona alone reported a 19% decrease. Hawaii saw an 18% decrease. This trend does seem to be domestic which is pretty interesting. As our state’s bankruptcy filings fall, those of places such as Belgium saw a 9.4% increase and The Republic of Cyprus  almost entirely filed for bankruptcy as a whole in March of 2013 before they asked for help and therefore managed to stay financially afloat.

Obviously most people try to avoid bankruptcy as it has a negative stigma and can be costly. This fact coupled with the increased availability of consumer credit markets means the option for people to borrow rather than file for bankruptcy becomes more favorable and will consequently continue the downward trend in filing for bankruptcy.

However, filing for bankruptcy is still the best option for some. It helps discharge debts, whether medical or credit and helps people focus on the unforgivable debts which can include such things as taxes or possibly child support. It’s this aspect of bankruptcy that offers many businesses and individuals peace of mind.

Should you choose to file for bankruptcy in 2014, Advantage Legal Group is here to help. For more information on bankruptcy, check out these blogs:

What to Do After Filing For Personal Bankruptcy

Will Bankruptcy Mean I Have to Give Up My House?

Preventing Bankruptcies