Repercussions of foreclosure?

Question

we are upside down in our current home and even bringing in money havn't been able to refinance we were told to walk away, putting money down on a new house would be easier, what would the repercussions be?
Suzeq34

Answer 1

I don't know why anyone would tell you to walk away from a home and stop paying the mortgage. Talk to the bank and try to work this out. If not, maybe you can use the cash you have and sell the place at an attractive price. This way, you will be out of the situation without having to foreclose.

Some of the repercussions of walking away would be...
- the bank will take your home.
- your credit rating will be trashed.
- with bad credit scores and a foreclosure on your credit history, you won't qualify for a new loan for quite a while (we're talking 'years').
- you'll have trouble qualifying for good rates on any loan (car, department store card, etc).
- your insurance rates may go up since insurance companies are starting to look at credit scores. If you are getting a new car - even for free, you need insurance.
- your bank will auction your home and if they can't get all their money back, they can come after you for the difference. If they don't get all their money back, they can forgive the difference but the IRS will treat that as income and tax you on it.

Answer 2

If you go through foreclosure on your current house, it won't help to have money to put down on a different house because you're not going to get a mortgage. No lender is going to approve you for a new mortgage with a recent foreclosure on your credit report from your last mortgage. Your only shot in this regard would be to manage to qualify for another house while owning this one with a current mortgage. Since you cannot afford the one you have, it's highly doubtful that you could qualify for another one.