Foreclosure occurs when, for whatever reason, agreed to payments for a mortgage loan and not being made in a timely and consistent manner. The reasons this can vary as widely as there are homeowners, from the sudden loss of life from a contributing family member, unexpected loss of income, or a myriad of other possibilities. Naturally, it is better to take swift action before things come to this point with the lender, as you are given multiple notifications and chances before this stage to ward off the legal proceedings.
As circumstances have led up to the point of foreclosure, likely, you had already had several late or missing payments on your history, and you have already begun to feel the ill effects of a negative credit score. Sleepless nights may become familiar as the communications from your lender have increased, leading up to the final point of foreclosure. Our imaginations are much worse than reality, so take heart, others have survived foreclosure, and you can as well by knowing what you face and that there is hope and a light at the end of the tunnel. It can set your mind at ease to take a realistic assessment of your situation and set up an action plan to get out of it as soon as possible so you can get that weight off your shoulders and move on. No matter how you have ended up in this situation, we will discuss five ways the foreclosure of your Philadelphia house will impact you.
Lenders hesitate to deal with the risk of a borrower with such a history. These financial penalties will continue for as long as the foreclosure remains on your credit score, a total of seven years. The seven year period starts from the date of the first missed payment that led to the foreclosure. When lenders review your credit score details, the foreclosure of your Philadelphia house will impact you by either facing extremely high-interest rates or flat-out denial of credit. This lingering ill effect means that life will become even more expensive as it is difficult to survive without credit. Sadly, the higher your credit score, the more impact a foreclosure has on the new score. Typically a three-year period with timely payments will clear your credit history of the foreclosure.
However, the negative light in which lenders view foreclosures can arguably be more significant than the effect a foreclosure may actually have on your credit score. Although all lenders have their own individual criteria for lending, they all view foreclosures as a serious derogatory event in your credit history, right behind bankruptcy. Dealing with a foreclosure is a challenging process that can have a major negative impact on your credit history but with time and good payment habits it is very possible to recover and buy another house in the future.
Fees and Deficiency Payments
The financial blows from the court fees and any deficiency from the foreclosure of your Philadelphia house will continue to linger until the debt is satisfied. When you go through the foreclosure process in court, you are responsible for paying court fees. Additionally, you will still owe the difference between the amount realized for the property against any remaining debt to the mortgage lender, known as the deficiency. In this case, if a property sells for a lower price than the total debt owed, a lender may sue a borrower for a deficiency judgment. At this point, if the court rules in favor of the lender, the borrower would be held liable for the outstanding balance.
Sold at an auction, lenders typically accept lower appraisal values and bids for foreclosures. A lender will usually accept the lowest appraisal value in order to sell the house quickly. You likely owe penalties in addition to the overdue payments, and this will all come from the proceeds. Whatever equity you may have gained over the years is likely about to be gobbled up by fees and penalties, along with a low sales price. The foreclosure sale tosses everything you have built right out the window. The loss of the home and your equity because of foreclosure of your Philadelphia house will impact you in retirement by having depleted what could have been a significant contribution to your golden nest egg.
For example: Let’s say 10 years ago you bought a house for $200,000 but its now worth $265,000. You’ve been on time with your payments for the past 10 years but you recently lost your job and got a divorce which has had a major negative impact on you financially. At the moment you only owe $120,000 which means you have $145,000 in equity on your house. Unfortunately because you’re so behind on your payments you have $10,000 in late fees that will be taken out of that equity which brings you down to $135,000 in equity. In addition to that, the process of actually foreclosing may cost up to $20,000 which would leave you with $115,00 in equity at this point. Then when you consider the idea that the lender will take the lowest appraisal, in this example let’s say $250,000, means that another $15,000 in equity was taken off the top. And now you’re down to $100,000. Sometimes, lenders are willing to take 90% of the appraised value as a purchase price from a buyer which means they would accept a purchase price of $225,000. As you can see, your equity gets destroyed in the foreclosure process.
When you are already experiencing a change in your life from whatever has caused the foreclosure to take place, the foreclosure itself becomes a looming nightmare. It is difficult to remember that it is strictly business for everyone else involved when you are emotionally invested. Losing your home and the equity you have built, facing court, and all of the expenses that come with it can have highly detrimental mental effects on yourself and your family. The stress of the unknown date the bank will evict you and where you will go is regrettably one of the most brutal ways the foreclosure of your Philadelphia house will impact you.
The stress of a foreclosure may directly negatively impact other areas of your life such as your health, your family life between your spouse and kids, your job or lack thereof and so much more. So it’s important to do your best to avoid getting foreclosed on to begin with.
You can find out more information on the foreclosure process specifically in Pennsylvania by checking out this website.
Standard of Living
Concerns about the standard of life you now face with your foreclosure history following you for years are valid. Because of the foreclosure, life has become even more costly. There are limitations on those with a foreclosure in the past. The red flag of a foreclosure on applications that require you to experience a credit history search can begin a downward spiral in areas of your life, such as the housing you find available and higher paying job opportunities. The job you accept and the area you live in can have a considerable effect on the enjoyment of your day-to-day life and is another way the foreclosure of your Philadelphia house will impact you.
One of the best ways to avoid foreclosure and all the headache that was mentioned is to sell to a direct home buyer like EZ Real Estate Solutions LLC. We understand all of the ways that foreclosure of your Philadelphia house will impact you and want to help you steer clear of that stress and chaos. If you are facing foreclosure, don’t wait until it’s too late. If you are only a couple months behind but you see where things are headed then it’s best to give us a call at 215-770-0260 ASAP so we can give you a fair cash offer and you have the chance to walk away with more equity than you would if you foreclose. That will make the process much easier for both of us. If you are already in foreclosure now, we still may be able to solve your problems. Ask any questions you like, with no obligation because EZ Real Estate Solutions LLC is here to help you. Give EZ Real Estate Solutions LLC a call right now at 215-770-0260 or send us a message!