Upcoming Foreclosures

How bad would it be for our credit if we bought a house, and let our condo fall into foreclosure?

I want to try to get approved for another mortgage for a house, because our condo won't sell. We live in Southeastern Michigan, and the market is awful, and we need to get into a house.

Public Comments

1. Don't do that, better to try and rent the place out for a loss then let it go into foreclosure, don't give up yet :)
2. Pretty bad!!!
3. You might not even qualify for a mortgage as long as the condo loan is active -- and especially not once it goes into foreclosure. Look into renting it out, even if you just cover the mortgage or take a loss. The long term effect on your credit will impact your credit card rates, home owners insurance, car insurance, and your ability to finance furniture, etc. Some employers even check credit -- to see if you are reliable. A bad credit report CAN mean that you would be an easy target for a bribe -- so jobs where you have access to money or merchandise, or where you influence contracts, etc. -- the employers CAN and DO run credit checks. It could also become impossible to get credit (cash) if you had a real emergency. Do anything you can to avoid foreclosure.
4. get it rented! Contact realtors to find you a tennent. IF the bank forecloses and does not get what is owed + legal fees....they may attach a lien to your new place and eventually foreclose on that too. People are renting until the market stabilizes
5. It would be very bad for your credit. I would either hold out until you can at least get out of the condo without losing your shirt or rent at a loss which is at least tax deductible. You may have a lot of other options to lighten the financial burden such as combining credit card debts onto one loan or lower interest rate credit cards, cutting luxuries and finding other income. If you were able to lower expenses or raise your income or both, you may be able to afford to rent at a loss and still keep your heads above water.
6. You should defintely look to rent the condo out. When you apply for a mortgage and can prove that you have a lease on the condo. The mortgage company will consider that and it will help you debt to income ratio. Dont make a move until you get a signed lease to rent your condo.
7. Terrible idea. This will effect you for years on credit cards, insurance rates, obtaining employment - it goes on and on. Can you rent your condo?
8. There are two things to consider here. First of all, have you been late on your mortgage payment in the last two years? Secondly, does your state allow the lender to recover a deficiency? One of the main things most people don't understand is that, sometimes, having a lower credit score doesn't make your credit worse. To be blunt, if you can't get credit now, your score doesn't matter. Most guidelines for prime mortgage rates require no mortgage "lates" in the previous 24 months. Therefore if you are already 90 days or more late, it is going to be really tough to get financing unless you have a huge down payment (at least 30%). At that point, adding a foreclosure doesn't really hurt you much. Sometimes, a larger problem occurs if the lender is allowed to recover a deficiency. A deficiency occurs if the lender sales the foreclosed property for less than what you owe on it. Many times, the lender can sue you for the difference. If they can't, many times the IRS will consider the defiency income and you'll have to pay income taxes on the forgiven debt. Check with your accountant to see how this applies to you. Getting a mortgage loan with an IRS tax lien or judgement filed against you is typically even harder than trying to get a mortgage with bad credit. The good news about a slow Real Estate market is that the Rental market tends to pick up. If it is possible to do so, it might be better to rent out your condo instead of letting it go into foreclosure. Then, in a year or two, when the market eventually picks up, you have the option of selling the condo or keeping it as a rental property. I hope this helps.
9. The foreclosure will be bad, of course. But if you can get the other mortgage and start making on time payments on the new house, the foreclosure will not drag down your score as much, because you have other positive credit history. But try to sell the condo or rent it out until you can figure out some other solution besides foreclosure. That would help your credit even more.