Foreclosure results in a number of negative effects that can affect many areas of your life. Of course it will send your credit score plummeting and make it harder for you to get a mortgage in the future; but there are other affects.
If you're nearing foreclosure or are in the middle of trying to save your home, you need to be aware of how it will affect you in the future. Here are some negative effects of a foreclosure you need to know.
Loss of Home
Of course the immediate effect of a foreclosure is the loss of your home and with it a little self-worth. A foreclosure can be devastating on a family and lead to additional family issues and difficulties as well.
Difficulty Qualifying for a Home Loan
It goes without saying that after a foreclosure, qualifying for a mortgage will be difficult. If a previous lender foreclosed on your home, the chances are a new lender won't want to take the chance.
Lower Credit Score
A foreclosure will undoubtedly cause your credit score to go down. It's a negative mark against your financial status. Having good credit is important if you want to qualify for other loans and even credit cards. Even if you do qualify for a loan or credit card after a foreclosure, the interest rate will probably be very high as a result of your previous credit history.
Legal Repercussions from Your Lender
Since you defaulted on your mortgage payments, your lender can legally go after you for damages. This is on top of losing your home. If they also take a loss on selling your home, they can report the loss to the IRS and credit their loss as your profit. Which means the IRS can go after you for the difference (aka personal income).
Difficulty Renting an Apartment
When applying to rent/lease an apartment, many landlords run a credit check and history report. Your foreclosure will definitely be listed on your credit report, which can cause some landlords to pass on your application. And they have every right to. A foreclosure is a representation of your inability to keep up with your monthly bills. A landlord wants a tenant who will pay each month and not cause any trouble. Unfortunately a foreclosure doesn't represent you well as a tenant.
As you can see, there are a number of negative effects of a foreclosure. So avoid it as much as possible. Discover what
foreclosure options you have.