Credit Score Issues

• Defaulting on a mortgage loan can negatively affect your credit score. Lenders report borrower behavior to the credit bureaus, and the information listed by a mortgage lender or another credit directly influences your personal credit rating. Late payments and defaults lower your rating and with a reduced rating it's challenging to qualify for other loans, or even refinance your existing mortgage loan. Refinancing a mortgage can help financially strapped borrowers acquire a lower rate and house payment. But getting a refinance generally requires a good payment record.
  
  

Risk of Foreclosure

• The inability to keep up with house payments increase the likelihood of losing the property to mortgage foreclosure. Lenders don't start the foreclosure phase until payments are at least 90 days behind. Borrowers have the option of paying off the delinquent balance and stopping a mortgage foreclosure. But if they are unable to provide the necessary funds, lenders eventually take back the property and force borrowers to vacate the home.
  
  

Finding Another Home

• Getting a rental home after defaulting on a mortgage and losing a home to foreclosure creates a whole new set of problems. With a fresh foreclosure on your credit report, landlords may pass on your rental application or approve your application only if you pay a higher security deposit and higher monthly rent. And if you plan on financing another real estate property, you'll have to wait a minimum of three years after the mortgage foreclosure. At this point, you're eligible for a mortgage loan backed by the Federal Housing Administration (FHA), as long as your credit score is at least 620.
  
  

Avoiding Default

• Mortgage lenders are here to help you. If you fear default, speak with your lender immediately to work out a solution to reduce your chance of default and foreclosure. Provisions offered by mortgage lenders to help troubled borrowers include loan forbearance, which allows borrowers to stop making payments for a few months after a job loss or illness. Lenders can also modify mortgage terms to lower the existing mortgage rate and mortgage payment to help reduce the likelihood of default. Both options require meeting specific requirements. Discuss eligibility with your home mortgage lender.