To Foreclose or Not to Foreclose (Part 1)

Another Day

Having a house is the ultimate dream.  I have dreamed about it but never thought I would have it so soon, thanks to parents who have generously thought of providing for their children while they and the children are still young and the parents can see and feel the gratitude of the children for that wonderful (and needed) gesture (okay, dole-out).

Indeed why wait for death, or why imagine that your children are waiting for your death, before giving your children what you are thinking of giving them anyway?  But this is for another story and for another time.

In the year 2009, the world was rocked by stories of foreclosures, foreclosures which have been instrumental in bringing down the single most powerful economy in the world – that of the United States.

Indeed, how can you continue paying for a dream when the value of the dream has considerably gone down?  Translated, how can you pay for a $2,000 mortgage when the value of your home has gone down from $400,000 to $250,000 in the blink of an eye.

I have several relatives and friends who have gone down the path of foreclosure, some by choice, others by necessity.

I wonder, though, if they have put much thought to it – because the consequences of foreclosure can be pretty dire.

Yes, these can happen to you if you foreclose:

1.  Credit problems.  It will lower your credit score; if other creditors (credit card companies, for example) find out that you have defaulted on a mortgage, they will think that they are not going to be paid too and might impose on you the default rate of 30% on your balance (balances?); it will be harder for you to get a loan, or if you do get a loan, you will not get a low interest rate.  And it will take at least 3 years for everything to go back to normal.

2.  Where will you live?  Selling your home might mean you need to find a house to rent.  Lessors typically look at the credit score and might not approve you if they perceive you as a poor payor. (hint, hint – if you are going to foreclose, look for a house to rent first) 

3.  An uprooting.  Of course, if you leave your neighborhood, the children might need to transfer to another school and have new friends, their way of life (and yours), practically overhauled.   (so you may want to get them in on the decision)

4.  The postponement of a dream.  Because it will take 5 years before you can take on a new mortgage, that is, buy a new home.

5.  Who will hire you?  If you will be applying for a new job involving money (say you are an accountant applying for an accounting position, bank cashier, property manager or anything similar where you will be entrusted with money or property), if they find out you have a foreclosure on your record, they will not hire you.

6.  A tax bill to pay.  But I will discuss this in the next article.

But then, for many, it is done.  They have let their homes go to foreclosure, and are more or less feeling the consequences of their decision. 

But are there positives?

I would think so.  Life would be as it was – they have more cash flow, it is easier on the mind to think that it has gotten rid of a perceived mistake (excitedly bought a home, home price drops, bad decision, bad timing) and it can start anew.  I am sure that it can be a shackle and for some, it could have been a sink or swim decision.

How has it been for you?

Be rich,

Issa

Article by Issa. Art by D. Copyright 2010.
Website: www.YouWantToBeRich.com
Email: issa@youwanttoberich.com

Disclaimer: I encourage you to seek a competent professional, like an accountant or a lawyer specializing in foreclosures.  I specifically disclaim any liability, loss, or risk which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this article.

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