Mortgage Loans – Mortgage Loan

Have no equity and trying to avoid foreclosure?

During the past couple of years it has become common for every person to take home loan and buy a property either it for primary residence purpose or investment purpose. However the scenario has changed with downfall in economy and rise in unemployment rate, many people are now unable to pay for the mortgages that were taken during the booming economy.

Now the main goal of the homeowners who have taken mortgage is to save the home from foreclosure. If you are unable to pay the mortgage debt, you are not only risking your home but also the credit rating is at risk. A debt consolidation loan is not an option when there is no equity.

The challenge to save the home from foreclosure is even harder for those who are unemployed that do not have steady income to pay off the mortgage every month on time. If your loan is in default, the lender will take the possession of your home and the investment that you made till date will go in vein.


There are some occasions where you can afford to stop making payments without risking your home to foreclosure. Here is how:

There are many homeowners who already took second and third mortgage, home equity loan. In such situation even if the lender forecloses your home hardly he cannot recover any amount other than incurring foreclosure expenses. In that situation, you can stop making payments if you are having trouble meeting mortgage payments every month.

Here you continue to make payments or reduced payments on the main loan and stopping payments to rest of the debt prevailing on that home. Often, you first mortgage will be the main loan on your home that require keeping current to avoid foreclosure.

Doing this way of stopping payments to loans your home secured that should be considered as a last resort and if you do not risk your home to foreclosure. This process leaves the homeowner with more money that allows paying the one or more lenders who could foreclose your house.

This situation arose during the last five to ten years, the banks started to give the home loans without having enough equity in the homes that are secured for loan. The main intention of banks behind doing this with the expectation that property values would raise fast enough that can manage to provide adequate security for the home loans that kept the home as a security.

This situation has reversed due to economic slowdown in the recent couple of years. With slowdown in economy, many people have lost their job and unable to keep up with payments regularly every month and resulted in real estate market crash. With real estate market crash, home values reversed making new lows, erasing whatever equity that is there at the time of loans taken.

This has given a way for the homeowners possessing an unsecured home loan (when there is no equity to cover the loan) making the lenders unable to sue you if of default and foreclose.

What Are the Ramifications of Foreclosure?

In the past two and half years, millions of people have faced foreclosure. There are many ways through which one can actually avoid foreclosure and we have already discussed about it but the important thing here is to know the ramifications for foreclosure. Now after the foreclosure, the person looses his dream home and may be staying in a ranted home but the thing is that he is free from the fear of foreclosure and the paying of unbearable monthly mortgage payment.

In a word after facing the foreclosure the person has to start the financial career altogether again and building the credit. We all know that foreclosure affects the credit score and it drops the credit by 250 to 300 points. Not only that, foreclosure also stays on the credit report for almost 7 to 10 years. Some people even prefer short sale or filing Bankruptcy to avoid foreclosure in fear of that huge negative effect on the credit.

Other thing is that the lenders will not like to take the risk to approve for any loans until and unless the borrower improves the credit score to a certain extent and it takes almost 3 to 5 years to get a new loan to buy a home again. But certainly foreclosure is not the end of the world. If someone pays all the bills on time and make plan on his financial expenses then it is not too hard to improve the credit and get approve for a new loan to buy a home again.

How long after foreclosure can I purchase a home?

Foreclosure affects your credit heavily and it stays on your credit for 7 to 10 years but you can be able to perchance a new home sooner that that time mentioned above. But how soon can you get the new mortgage will depend upon how well and how soon can your improve your credit score. The sooner you improve your credit score the sooner you will get approve for your new mortgage loan.

It is a fact that foreclosures have so many negative affects on your credit score and if you have numerous negative items on your credit score like charge off, delinquent payments, collection accounts then it may take you many years to get approve for a new mortgage loan. But if the foreclosure do not affects your credit heavily and you can make a huge down payment then you may be able to get approve for the mortgage loan.

The thing is that after the foreclosure you need to do a lot of planning and research to become a home owner again. You should try to make a lot of savings too. So savings and improving the credit should be in the first priority to purchase a home after the foreclosure. You should consult with a financial consultant to know how should you proceed in this regard so that he can help you in the right direction.