Losing a home is a difficult and life-changing event for the entire family. A home foreclosure not only hurts you, the homeowner, but it also affects the bank or first secured party. When you stop making your monthly mortgage commitment, you ruin your credit rating and your financial standing with your financial institution.
Loss of Home
According to the Mortgage Bankers Association, one in every 200 homes in the United States is foreclosed upon. When your mortgage is more than 90 days past due, it becomes at risk of going into foreclosure. Foreclosure is the legal term for a homeowner forfeiting on the original debt or loan to the house by not financially making timely monthly payments as agreed upon. One of the main devastating effects of home foreclosure is losing the home. This means that within nine months or less, the home and the property must be vacated. What is not removed from the property becomes the ownership of the bank. A court order can be entered and you will be legally obligated to leave your home or risk arrest. Locks and barriers may be attached to the doors and windows to prevent theft after the date the foreclosure takes effect. Once a foreclosure is enforced, you will no longer be able to make payment arrangements or cash out the mortgage and live in the home. The deed is then forfeited and becomes null and void.
Poor Credit Rating
One effect of the home foreclosure process is a poor credit rating. Anything more than 90 days past due can significantly lower your credit score by several points. Past due payments remain on the account, and the account will close. When the mortgage company enforces a lawsuit, it will enter a judgment against you. The judgment shows up as an additional red mark on your credit report and can remain there for up to seven to 10 years--even if it is paid in full. A poor credit rating can affect obtaining future credit by preventing you from obtaining a mortgage, buying a car, renting an apartment, obtaining a credit card or personal credit loan and even getting a job. In some careers, such as in a financial career, maintaining a high credit rating is essential. If you receive a foreclosure notice on your home, your employer has the right to fire you.
Home Damage
While foreclosure has devastating effects for you, it also affects the property in some cases. Sometimes, homeowners may damage the home by denting walls, breaking windows and ripping off doors. If garbage is left behind, the home or the property could become infested with insects or rodents. When the house is left vacant, it also poses a risk for vandalism or unlawful entry.
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