Going through foreclosure is a difficult and emotional process. Not only does it cause you to lose your home, but it also significantly damages your credit score, which can be hard to repair. In this blog post, we’ll explain how foreclosure impacts your credit score and provide tips on how to repair it. Finally, we’ll provide some information on options that are available to help you prevent foreclosure altogether.
How Does Foreclosure Impact Your Credit Score?
Foreclosure has an extremely negative impact on a homeowner’s credit score. In fact, foreclosure can drop your credit score by 140 – 160 points. With a lower credit score, you will have trouble obtaining new loans, and the loans that you are able to obtain will carry a much higher interest rate.
Can Your Credit be Repaired After Foreclosure?
While the consequences of foreclosure are serious, it is possible to repair your credit after foreclosure. That said, it is a very lengthy process. A foreclosure will typically remain on your credit report for up to 7 years after it is reported by your lender. However, there are a few things you can do during that time to start rebuilding your credit:
- Don’t take out new loans. If you lost your home to foreclosure, you are probably facing financial hardship. It may be tempting to borrow more money to help you through the tough time, but this will negatively impact your credit score. The cause of this is that it increases your debt-to-income ratio (i.e. the total amount of debt you owe compared to your income).
- Pay down other debt. If you can pay down other debt, such as car loans or credit cards, you will decrease your overall credit utilization. This helps to bolster your credit score over time. Plus, consistent, on-time payments also tend to give your credit score a boost.
- Save more money (for a future home). It can take a long time before you qualify for another home loan after going through foreclosure. Depending on the type of loan, it could take 2-7 years. While saving money will not help your credit score, it will help you to buy another house faster, as lenders will look favorably on a large down payment. If you are able to save at least 20% or more for a down payment on your next home, you may be able to recover from foreclosure faster.
How to Save Your Pittsburgh House from Foreclosure
The big question is – can foreclosure be stopped? Luckily, there are several ways to prevent foreclosure. If you are finding it difficult to make your monthly mortgage payments, consider notifying your lender immediately. Many lenders want to work with homeowners in order to prevent foreclosure, so they may be able to advise you on a solution.
If your bank is unwilling to work with you to avoid foreclosure, another option is to sell your house. To do this, you could find a real estate agent to list your home. However, it can take time to find an agent you trust. In addition, you will have to wait for a qualified buyer to make an offer and close on your house. This takes between 60-90 days on average.
Instead, you could consider selling your home without an agent to a cash buyer. This is typically the quickest way to sell your house and will stop foreclosure in the least amount of time. Because real estate investors typically pay cash for your house, they can close in as little as 2 weeks. Also, they will purchase your house “as-is”, meaning you won’t have to make any repairs. This is in contrast to working with a traditional buyer, who may make requests for repairs.
Do you need to sell your Pittsburgh home fast in order to stop foreclosure? Contact us today! McIntosh Management, LP would be happy to make you a cash offer for your house. We purchase properties in any condition quickly and we pay cash. Check out the Testimonials section on our website to see what others have to say about our company!