You probably are already aware of the fact that home foreclosure will have a major negative impact on credit rating. How this event impact on your credit score may vary, but remember that every mortgage payment that you miss will be reflected on your credit report. In addition to this negative report on payment defaults, foreclosure will receive a corresponding negative entry in the legal actions section of your credit report. Home foreclosure will bear heavily on your credit rating if you only have few other debts. On the other hand, if you submit positive or favorable record for your car and credit card payments, then this can help buffer the impact of the home foreclosure on your credit reputation. However, if you have other items in your credit report with negative entry, then this will further worsen your credit rating.

Another aspect of the home foreclosure that you have to take into account is its long term impact. Generally, the negative entry will remain in your credit report for a maximum of seven years. However, this does not necessarily mean that have to wait for the seven years to lapse before you start doing some serious house cleaning. Proper personal financial management requires that you start making the effort to keep your accounts current as soon as you recover from your financial rut. If you are able to keep your other debts in positive territory, chances are you may qualify for a new loan in as little as 2 years.

What are the things that you have to expect once you qualify for a new loan several years after your allow to have your home foreclosed? Here is the scenario that you should expect once you apply for a new mortgage. You will have to contend with higher down payment and interest rate. You also have to keep in mind that there are government-sponsored financing programs that are unavailable within a two-year period from the time that your home was foreclosed.

One thing that a lot of homeowners fail to consider is the tax penalty associated with home foreclosure. This is what will happen if you go along with the home foreclosure. If your home ends up being sold for less than the amount you owe, the balance amount that remains uncovered by the sale will be considered “forgiven.” This is classified as income since it is a financial obligation that was “written off” as a result of the home sale. You will have to pay tax for this “income.”

Tags: Home Foreclosure, Home Sale, Real Estate

This entry was posted on August 6, 2010 at 10:03 pm and is filed under Foreclosure Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.