Top 5 REasons You want to avoid foreclosure
San Antonio! Here are our Top 5 Reasons To Avoid Foreclosure!
Sometimes bad things happen and we lose the grip on our lives and finances.
Losing your home to foreclosure is one of those things — and it’s always bad for your future.
While this should always be avoided, sometimes we have no other choice but to foreclose and look for alternatives.
Foreclosure doesn’t just mean you lose your home, it also impacts your life in many other ways. It is a terrible situation to be in, but there are always solutions to every situation. In this article, we will explore five reasons why foreclosure is bad for you and your future and also provide you with a proper alternative.
Without further ado, here are five reasons why foreclosure is bad for your future:
- Foreclosure ruins your credit score
- Tax problems
- Buying a new home gets way harder
- You may need to look for a new job
- It’s mentally exhausting
Let’s dive deeper into each one of them and see why they impact your future in such a bad way.
1. Foreclosure Ruins Your Credit Score
Once your home is lost to foreclosure, you will take a hit to your credit score by about 200-280 points. Your credit score is important for many different reasons and losing 200 or more points will cause a lot of bad side-effects. It’s not a situation that you want to be in.
It will take up to 3 years or more of on-time payments to restore your credit score. There are always legal ways to tweak this, but in most cases, you’re going to have to commit to paying on-time for years to come. Foreclosure brings about many long-term consequences for your credit, making your financial recovery almost impossible.
With 850 points being the maximum you can have, losing 280 of those to foreclosure will disqualify you from many benefits and future loans. It becomes increasingly difficult to qualify for a new loan, buy a new house and you also might have to pay additional taxes.
2. Tax Problems
While money issues and foreclosure go hand in hand, nobody seems to talk about the tax consequences of this process. And while homeowners are struggling to figure out what to do with their problem (see point 5), they fail to realize that they are also likely to run into tax implications.
It works like this — any time debt is forgiven, the law considers it a taxable event. The IRS clearly states that any time you borrow money and fail to pay it back, you are subject to tax since it’s considered an income to you. A mortgage is a loan, and when you’re repaying the money, there are no tax obligations and it’s all good for everyone. If, however, this owed debt gets canceled or forgiven (as in case of foreclosure), it has to be included as income for tax purposes.
Since you no longer have the obligation to repay the lender, that loan amount is now considered as income, and that’s why you are very likely to get taxed for it.
3. Buying a New Home Gets Way Harder
It is not unusual to seek a future mortgage following a foreclosure, however, it can be very difficult. While buying a new home following a foreclosure might take some time and effort, it’s certainly not impossible. In most cases, you will have to wait up to 7 years to buy a new home, and the best way out of this is a short sale which allows you to buy a new home only 2 years following a foreclosure.
There are ways to alleviate the penalty in case of some unfortunate circumstances, but it’s still a difficult and unpleasant situation to be in, which leads us to the next bad consequence.
4. You May Need to Look for a New Job
For most Americans, the job is where the home is. Traveling long distances is not a good option in the world we live in today, and most people prefer to work in a job that’s close enough to where they live. The only exception to this is people who work remotely from their own homes.
In the event where foreclosure leads to relocation, a new job hunt is most likely necessary. Having to search for a new job can be exhausting, stressful and it impacts your finances as well. Some employers also look at your credit score so that could also make it difficult to get a new job. Having a job is important in this day and age, and avoiding foreclosure is a good way to make sure you keep that job.
5. Mentally Exhausting
Finally, all this process around foreclosure will be taxing your mentally, every day. Having to worry about money is one thing, but then everything else follows which just makes it a lot worse. Mental exhaustion leads to long-term consequences, as well as difficulties in dealing with your family, friends and everyone else you know.
We all want peace of mind, so we should try and avoid these problems the best we can.
There are a few ways to deal with foreclosure, but the best option is to probably avoid it altogether.
Selling your house on time and avoiding foreclosure will make sure to minimize these consequences and help you build a better future for yourself and your family. Fill out our contact form and get your FREE, NO-OBLIGATION, Avoid Foreclosure Strategy Session!
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