Top Problems Faced by People in Foreclosure

Foreclosure is a stressful and scary process that homeowners want to avoid whenever possible. For people facing financial strain or a financial crisis, the threat of foreclosure is a terrifying one. Unfortunately, beyond the obvious issue of losing their home, there are some other common problems that people in foreclosure face.

To make sure they don’t have to deal with these issues, it’s important for Birmingham homeowners to know about the full scope of problems that come with a foreclosure as well as ways to avoid the process entirely.

Credit Impact

Your credit starts to be impacted once you miss your first mortgage payment, and it continues to fall with each missed payment and each step of the foreclosure process. Homeowners should expect their score to drop by at least 100 points after a foreclosure, and those with excellent credit can see a drop of 140-160 points.

What’s equally difficult for homeowners is that a foreclosure stays on your credit report for seven years. It’s viewed as a major red flag for mortgage companies and lenders, and it can make it difficult for individuals to purchase another home.

Many lenders simply won’t give a mortgage to people with a foreclosure on their credit report. Others will consider a loan once a foreclosure is a few years out but often will add extra fees or a higher interest rate.

The bottom line is that having a foreclosure on your credit report will make it hard and expensive to get future mortgages and loans.

Deficiency Judgments

If your home is sold in foreclosure for less than the amount of your loan balance, the lender can file a deficiency judgment for the remaining amount. This means that once your home has been sold, the bank can file a lawsuit against you to recover the balance of the loan.

This is a scary prospect for homeowners because it means that even once they’ve gone through the stress of losing their house, they could face another lawsuit for money that they simply don’t have.

Property Taxes

A homeowner is responsible for paying property taxes as long as they own their home. If you miss mortgage payments, you’ll get behind on property taxes. Generally, mortgage companies will pay unpaid property taxes so that they’re able to sell the home in an attempt to recover some amount of the loan. If they don’t, the government can seize the property and the lender won’t be able to sell it.

However, the fact that the lender pays the property taxes does not relieve the property owner of this financial responsibility. Some lenders will send borrowers a bill for property taxes after a foreclosure sale. Like a deficiency judgment, it’s an additional expense for homeowners and one that many cannot pay.

Health Impacts

It’s important not to overlook the tool that foreclosure takes on people’s well-being. Not surprisingly, going through a foreclosure can have major impacts on an individual’s overall health and wellness. Research has shown that there’s a correlation between foreclosure and increased hospital and ER visits. The stress of the process leads to an increased risk of heart attacks, strokes, hypertension, and mental health problems.

Unfortunately, the foreclosure process is a slow one that usually takes a few months. During this period, homeowners are at an increased risk of having health problems and unexpected doctor and hospital visits. It’s an incredibly difficult process to go through, and sadly, it can have substantial impacts on short and long-term health.