How Bad Will a Foreclosure Hurt You?

A fast cash offer on your home may be a way to deal with a foreclosure. In 2022, foreclosures across the United States fell by 95% from 2.9 million in 2010. Foreclosure, however, remains a problem in Houston, TX. According to some research in 2021, 40,147 Houston families were delinquent on their mortgage payments. Generally speaking, you have 120 days after your first delinquent payment to get your mortgage payments in order before the foreclosure process begins. Let’s take a look at some of the ways a foreclosure can hurt you and what you can do about it.

How Bad Will Your Credit Suffer?

Once your home is foreclosed upon, your credit will suffer. According to some sources, your credit score will fall by as much as 160 points. Your mortgage provider will report any payment that is more than 30 days late to the credit bureaus. Missing a payment or multiple payments will ding your credit score by 50 points. By the time you have reached the foreclosure process, the six missed mortgage payments will have already had a serious negative impact on your overall credit score.

How Long Will You Have To Live With a Lower Credit Score After a Foreclosure?

If you are on the verge of losing your home to a foreclosure, you will have to live with that for years. On average, a homeowner will have to wait five to seven years before buying another home. Things like short sales and deeds-in-lieu of foreclosure, or other situations will also make it hard to buy a new home.

Foreclosures Have Tax Implications

A foreclosure involves both the lender taking your home and the federal government exacting capital gains taxes. When your home is foreclosed on, the lender will send you a form called a 1099-C. In addition to capital gains taxes, you might have to also pay taxes on any loan amount that was forgiven.

What Are the Options for Dealing With a Foreclosure?

Loss mitigation is the most common way to deal with a foreclosure and the easiest if you are not too far behind on your mortgage. The buyer and lender work together to come up with more favorable terms to catch the homeowner up on their payments. Most lenders never reduce the principal amount owed on the mortgage.

Short sales are another way of dealing with an impending foreclosure. Short sales impact your credit adversely and should be avoided if possible. Typically, the homeowner has to draft a letter of hardship. Short sales are typically not a favorable option for lenders and they carefully consider your letter before making a decision.

Short refinances are also an option. In this situation, the principal amount of the mortgage is reduced and the homeowner is passed off to a new lender. However, a short refinance will drop the homeowner’s credit score because they are not paying the original mortgage off.

A partial claim is also not a good way to go. The lender will advance you some funds, a second loan, to help you cover your missed mortgage payments. There is also a trial period where you have to be perfect on your payments and your credit score will temporarily drop.

You might want to consider working with a cash home buyer in the Houston area to get your home off your hands before you are foreclosed upon.

What Happens When Foreclosure Starts?

A foreclosure in the state of Texas can take one of two forms. The foreclosure will either be judicial or non-judicial. In a non-judicial foreclosure, which is common, a trustee will send a letter of default giving the homeowner time to remediate, record the default in land records, and then proceed to start a foreclosure sale. The other type of foreclosure will involve a lawsuit in court, which will trigger a lengthy legal process before the sale of the home.

Is a Fast Cash Offer On Your Home a Way To Deal With An Impending Foreclosure?

A fast cash offer from a firm like Houston Capital Home Buyers will help deal with an impending foreclosure. Fast cash offers are typically placed by real estate investors who have an interest in the property. You can get a cash offer from Houston Capital Home Buyers in as little as 24 hours and sell your home in as soon as a week. If you need the cash fast, there may be certain extenuating circumstances where you can stay in the home if you are still looking for a place to live.

With Houston Capital Home Buyers, you get the following benefits:

• A lightning fast cash offer.
• You mitigate the risk to your credit score.
• You don’t have to get an appraisal from a realtor and you don’t have to deal with a mortgage company that you’re already frustrated with.
• You don’t have to take the ding of a short sale or work with your mortgage provider on unfavorable terms.
• A professional real estate team who has a vested interest in helping you sell your home when you might not have time to put your home on the market and find a buyer.
• We take care of any repairs, inspections, and paperwork. It’s 100% hasslefree.

A fast cash offer is beneficial because it gets you cash in hand quickly. Selling your home might help you clear your mortgage, find a new place to live, and pay other bills that are piling up.

Give Houston Capital Home Buyers a call today and get a fast cash offer on your home.