What are the effects of foreclosure in USA...?
Question:
I am in a situation where the lenders will probably foreclose on my Florida condo (investment property) because I cannot pay the mortgage any longer. The problem is that the property is now worth less than the mortgages on it. I have a first mortgage of 400k and a second of 112k, and the property may only sell for 399k or so.
My questions are:
1. What will be the effect of foreclosure on my credit record and how will that affect my ability to ever purchase another home?
2. If the lenders foreclose, can they come after me for the difference in what they get, and what was owed? Will they take my 401k savings (about 15k) and can they touch my primary residence in CA? If they foreclose, will I end up owing them the difference, or do they just "forgive" it?
Many thanks,
GN.
Answer:
You need to check with a Florida real estate attorney. Some states like California have a anti deficiency law for home loans which means that they can not come after you if the house does not sell for enough to cover the loans. Others don't. A foreclose will lower your credit score. That may or may not be a problem. Depends on if you will apply for credit in the future.
The foreclosure will negatively affect your credit rating, so if it is at all possible, try to sell the property, even if it is for a loss. It would be better to come up with 120K (maybe a new mortgage on your primary residence?), and get it off of your hands.
If it goes into foreclosure, and they don't make as money from the sale as you currently owe, they can make efforts to try and collect the difference from you, and while it may be less than what you would pay them at this point, it is likely to be more than you would have had to come up with the get the house out of your hands without the foreclosure hitting your credit.
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