- When you go through foreclosure, it generally comes after several months of missed payments. For each one of the payments that you miss on your mortgage, it will hurt your credit score. After enough payments are missed, the bank will come and take your house through foreclosure. This act alone can lower your credit score by as much as 160 points. If you had a decent credit score before, it may be much less attractive to lenders after going through foreclosure.
- After the home is taken through foreclosure, your problems with the mortgage lender may not be over yet. If the mortgage lender cannot sell the house for what you owe on the mortgage, you may be responsible for a deficiency. In some states, the lender can take you to court and get a deficiency judgment against you. This requires you to pay the amount that you still owe on the loan. If the lender does not make you pay the difference, they will write off the debt. This could leave you with a tax liability for the forgiven debt.
- Immediately after foreclosure, you will not be able to buy a new house with a mortgage. Most people in this situation have to rent a new place to live. Even though you are not buying a place, it may be difficult for you to find a place to rent. Some landlords may be skeptical about providing you with a rental after foreclosure. You may be required to pay a higher deposit to secure a rental property.
- You will not be able to secure regular financing deals for some time after going through foreclosure. Your credit card interest rates may rise and you could have to pay very high interest rates for a car loan. You will typically have to wait at least five years before you can try to get another mortgage. Even at that point, you will have to put up a larger down payment and you may still have to pay a high interest rate on the loan.
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