How much does a foreclosure hurt your credit?

[Odette]

So I'm going through a divorce (my ex asked for it) and I moved out into an apartment. My ex and I own a home (which he still lives in) and he said he could not make the mortgage payment by himself so I agreed to contribute to the mortgage payment. The house was not able to be sold as we are upside down and would have to come up with approximately $30,000 at closing (not possible) to sell at the current market price.

Fast forward a few months, my student loans came due and I realized that I do not have the income to continue paying part of the mortgage and my rent. I told him this and stated I would be willing to pay a reduced amount and he stated he was just going to stop paying the mortgage. He was very pissed off.

So basically I'm wondering if I should just let him do this, let the bank foreclose, and take the credit score hit, just to be done with it.

I am one of those people who always pays bills on time and takes pride in having a good credit score but I simply do not have the additional income to pay for part of this mortgage. I've already reduced my student loans down to the lowest possible payment plan, I do not have cable, and I have the bare minimum cell phone plan. Basically my bills are rent, gas, electric, student loans, minimum credit card payments, and medical (prescriptions and doctor visits). I barely have enough to feed my dogs and feed myself.

My ex makes more money than I do and also gets overtime pay and bonus once per year (he even got one last year).

So I guess I'm asking for guidance or if anyone has ever dealt with this themselves, what do I do?

[lorihmatthews]

I wouldn't let the bank foreclose until you talk to them first. Will they work with you?

BTW, are you working with attorneys for your divorce? Have you requested alimony?

A foreclosure will stay on your credit report for 7 years. Here's some more info:

http://ezinearticles.com/?How-Bad-Do...ng?&id=2286044

[Odette]

I haven't talked to an attorney yet. To be honest, I don't have the money to pay any attorney fees. My other bills pretty much eat up my entire take-home pay.

I know that a foreclosure will hurt your credit and it stays on there for up to 7 years. However, I don't know that if I go to an attorney for the divorce that I will be able to resolve anything with the house if my spouse gets his attorney.

I think my first step would be to talk to an attorney about the divorce I'm just afraid of the cost and how in the world I would be able to pay for it.

[xostephie]

Originally Posted by Odette

So I'm going through a divorce (my ex asked for it) and I moved out into an apartment. My ex and I own a home (which he still lives in) and he said he could not make the mortgage payment by himself so I agreed to contribute to the mortgage payment. The house was not able to be sold as we are upside down and would have to come up with approximately $30,000 at closing (not possible) to sell at the current market price. Fast forward a few months, my student loans came due and I realized that I do not have the income to continue paying part of the mortgage and my rent. I told him this and stated I would be willing to pay a reduced amount and he stated he was just going to stop paying the mortgage. He was very pissed off. So basically I'm wondering if I should just let him do this, let the bank foreclose, and take the credit score hit, just to be done with it. I am one of those people who always pays bills on time and takes pride in having a good credit score but I simply do not have the additional income to pay for part of this mortgage. I've already reduced my student loans down to the lowest possible payment plan, I do not have cable, and I have the bare minimum cell phone plan. Basically my bills are rent, gas, electric, student loans, minimum credit card payments, and medical (prescriptions and doctor visits). I barely have enough to feed my dogs and feed myself. My ex makes more money than I do and also gets overtime pay and bonus once per year (he even got one last year). So I guess I'm asking for guidance or if anyone has ever dealt with this themselves, what do I do?

I would highly suggest trying for a short sale. he hit isn't quite as hard as a foreclosure. Contact the bank and see what they can do to help you:)

[queenvictoria2]

I HIGHLY suggest you call a lawyer ASAP. Not sure what state you live in but it is possible that your DH would have to pay the legal fees. I would at least go for a consult and fast.

[lorihmatthews]

I know money is tight but I can't see how you're going to get around the process of getting divorced without an attorney who's going to look after your best interests, especially since there's a house involved. It doesn't seem right that you moved out and now your husband is telling you he's just going to stop paying on the house. Have you even filed for divorce yet?

Can you defer your student loans due to hardship?

[dr. twiggers]

You could definitely apply for a forebearance.....interest will continue to accumulate, but you'll have temporary relief from the payments (can renew forebearance every 12 months).

I would highly recommend contacting your mortgage company ASAP. You'll likely need to file divorce papers to show the bank that you are indeed divorcing. They will ask you to fill out a LOT of forms, and you'll info from your ex.

You can try and do a short sale: Bank agrees to take less than what you owe and waives the upside down amount. These are somewhat difficult to go through though.

A deed in lieu of foreclosure basically allows you to turn in the keys and the deed and walk away. You avoid all the foreclosure mess. The bank takes the house and sells it.

Regular foreclosure is the last option.

You need to check and see if your state (IL, right?) allows 'default judgments'. This means that the bank can enter a judgment for the amount they are owed (i.e. you owe 200K and they can only sell house for 170K they can enter a judgment for the remaining 30K). Many banks are not doing this, but some are.

I can completely relate to what you are going through. We couldn't sell our house either and are about 20K upside down. We have a renter in the house, but she is late every single month. But I pride myself in fulfilling my responsibilities.

In your case, however, this is not your fault! You are doing everything humanly possible!

Oh, and foreclosures will only affect credit severely for 12-24 months. After 3-4 years lenders will give you good rates again. It takes 7 years to completely fall off. I've heard that it can drop your credit 300+ points. Apparently short sales or deed in lieus will affect credit less than a traditional foreclosure.

I would highly recommend consulting an attorney for the divorce. If your ex makes good money you are entitled to spousal support and he may even have to pay all your legal fees. You need someone to protect your interests!

[Odette]

Thanks everyone for the info.

I did leave a message for an attorney to call me back. We'll see what can be done.

[buzzytoes]

Just an FYI not all (I don't know of any that do actually) short sales waive the debt. What they do is take a lesser amount to clear the lien from the property and then renegotiate the balance of the debt that is left over. This still might be a better option for you than foreclosure. I just wanted to give you a head's up that a short sale isn't just going to make everything go away.

[Allisonfaye]

I don't have anything to add but I wanted to say good luck, Odette. It must be so stressful for you. At least you have that nice, stable govt job.

[kbela1]

How long were you married for? You need to make sure you have proof that you helped with the mortgage while you lived in another residence during the divorce; this can sway spousal support/any monetary settlements.

[SunnyFreckles]

Ok...

With your divorce, you need to be sure that the docs that you and your ex sign say that he will refinance the house OUT of both of your names into his alone. If he does not want to do that, I do think that you need to call your lender (who the mortgage payment is made to) and discuss either a short sale or a deed in lieu. Find out how things work in YOUR state, and also find out how long it takes for their review process of either the short sale OR the deed in lieu.

Most likely, the house will need to be listed AND an offer made on the house before you can even submit your paperwork for the short sale to be reviewed for approval. But make that phone call NOW and find out how long you have. If your payments are current or due for this month (the November 1 payment) then you have TIME, but you must get going on this process NOW!

Best of luck, dear!!!

[Odette]

The payments have been made (on time). The next payment is due December 1st. We were married for 2 years.

I'm curious as to how me helping him with the mortgage will sway spousal support/monetary agreements. He earns more than I do in salary, he lives in the house...I just don't feel like I should have to help pay the mortgage when he lives there and he can afford it. I don't want to ask for alimony...I just want him to refinance the house into his name only so he is completely out of my life.

[~Fabulousity~]

Originally Posted by Odette

The payments have been made (on time). The next payment is due December 1st. We were married for 2 years. I'm curious as to how me helping him with the mortgage will sway spousal support/monetary agreements. He earns more than I do in salary, he lives in the house...I just don't feel like I should have to help pay the mortgage when he lives there and he can afford it. I don't want to ask for alimony...I just want him to refinance the house into his name only so he is completely out of my life.

That's crazy if he earns more than you and is living in the house still he should be paying the mortgage solo IMO. Definitely talk to an attorney so that you can get this straightened out ASAP without hurting your credit.

[kbela1]

Originally Posted by Odette

The payments have been made (on time). The next payment is due December 1st. We were married for 2 years. I'm curious as to how me helping him with the mortgage will sway spousal support/monetary agreements. He earns more than I do in salary, he lives in the house...I just don't feel like I should have to help pay the mortgage when he lives there and he can afford it. I don't want to ask for alimony...I just want him to refinance the house into his name only so he is completely out of my life.

That's what I mean...I don't think you should be paying anything. Filing and getting the financial affidavits in asap is a priority. Him saying that he will just stop paying the mortgage is crazy. I wish you the best of luck, I just went through something very similar.