It is no secret that there are many dramatic effects to foreclosure. There are mental and emotional effects but there are also significant financial effects. Although the mental and emotional effects are significant and very personal, this page focuses on the financial effects of a foreclosure. In America so much of your financial life depends upon your credit rating. Your ability to obtain loans of all types, and other credit accounts, is directly tied to your credit rating. Your credit rating not only determines whether you can get financing, but also the terms of that financing (i.e. interest rate, repayment terms, etc.) No one in our great nation is exempt from this reality!
Foreclosure is the single worst reporting someone can have on their credit report! It has a greater negative impact on your overall credit rating than Bankruptcy or anything else. Many people think bankruptcy is the worst thing for a credit rating, but that is not the case.
A Foreclosure reporting will stay on your credit report for 7 years!
During this period, most types of available financing have significantly worse than average interest rates. Therefore, it becomes increasingly difficult to afford to buy a house, a car or anything else using credit.
Mortgage lenders are very hesitant to offer financing to someone who had a foreclosure in the previous 36 months! Even after someone gets financially back on their feet, they most likely have to wait 3 years before they can buy another house. Most people, who have owned a home before, do not want to be stuck renting for years.
Employers often check the credit standing of their applicant before hiring them. Employers could use your poor credit as a reason for not hiring you, regardless of how qualified you are for the job. This may not be fair, but it is reality.
These are a just a few financial effects of foreclosure. Our intention with these points is not to scare and intimidate, but only explain the true and tough realities a foreclosure has on someone's life. It is certainly worth taking seriously!