Once a person goes through foreclosure, the event will remain on their credit report for up to seven years, or more. While this is true, for some in this financial situation, there’s light at the end of a tunnel as it’s been revealed that the real damage is much shorter than that. According to this new data, the bulk of damage from a foreclosure occurs within the initial two years of filing. —
Directly after a foreclosure, borrowers may see a credit score drop of 150 points or more, but as each year passes, that score is going to climb by approximate 10 points, on average. By the time the third year after the foreclosure occurs, almost have of borrowers have a credit rating of 640 or higher, which is considered a “fair” score based on most standards.
What consumers need to understand is that foreclosure isn’t going to remain on a credit report forever, and at the most it’s going to fall off after seven years. Loan terms and credit ratings begin to improve long before the seven years, as the foreclosure recedes into the background and is replaced by information that’s more recent.
According to recent studies by industry experts, most borrowers are able to reenter the housing market in just two years after filing for foreclosure. While this is true, even those who have a prime credit rating may have to pay a premium to do this, with the average interest rate being up to 0.30 percent higher than for borrowers with no foreclosures from the past on their credit. For a mortgage of $250,000 this higher rate is going to result in more than $17,000 in additional borrowing costs over the course of the loan.
Another positive aspect impacting the foreclosure market today is that the number of foreclosures has been decreasing across the nation. In fact, they are now at the lowest rate they have been since January of 1999. This is attributed to the strong economy, along with the eight or more years of home price growth that have resulted in mortgage foreclosure being an infrequent occurrence. This is a backdrop that’s going to help the mortgage market limit the delinquencies in most parts of the country, if a downturn does occur.
What homeowners need to understand is that this isn’t a sweeping trend. There are some states where the presence of mortgage delinquencies is still going up. For example, in Vermont, the delinquency rate increased by 0.7 percent from the previous June and other states have seen similar increases.
Areas that are being affected by these upticks in delinquent mortgages are resulting in more people affecting financial hardships. For homeowners facing these situations, there is help with your foreclosure from legal services like Lawrence & Jurkiewicz and others. It’s important to note, the states seeing the jump in these delinquencies aren’t those affected by natural disasters, so this isn’t a contributing factor.
Homeowners facing foreclosure don’t need to rest on their laurels and wait for help to come. While the recovery time for the financial impact isn’t as tedious or long as it once was, it’s still something that can’t be ignored and should be prevented if possible.
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