If you are still able to somehow manage your mortgage even though you may be underwater in what you owe vs. what it’s worth — don’t just walk away from it. Many people believe that taking a hit on their credit score is worth ridding themselves of a headache of never getting out of their property what they owe.
Many of those who actually choose to default on their mortgage believe that over a little time, if they pay all their bills on time, no worries — financing another home is a piece of cake. For those homes that are lost due to financial hardships, the turnaround time for buying another property is 2-5 years, but if you opt to walk away from your mortgage, that time can easily double.
A credit score is only a factor in the overall decision for lenders to accept your application for a home loan and underwriters will closely scrutinize every possible reason why you may have defaulted. If those reasons don’t include any financial hardship or health issues, they won’t be so lenient on lending to you again. For walkaways, even having a good credit score isn’t a strong enough indicator of your willingness to pay your note on time. The only thing strategic defaults do is work against you.
Having said all this, it doesn’t mean it is impossible to get another loan after you’ve walked away from a previous mortgage. There are lenders out there who still want to make interest, so they might just take a bite at a high-risk borrower. Of course, this will all be at a steep interest rate to protect the lenders in the event of a second default and a hefty down payment of around 30%.
Obviously, there are economic factors that are often beyond a homeowners’ control which may devastate their financial status, forcing them to default on their home and lenders are accepting of that fact. Trying to get ahead by getting behind, on the other hand, isn’t going to get you very far. This is a good rule of thumb to remember while in the situation of being upside down in a mortgage or even before you purchase a home. Sometimes what we think will help us out, ultimately does the exact opposite.
Contact us today: 214.923.0261 or email us: info@archwoodproperties.com
