The Current Mortgage Crisis: Is foreclosure the best option?

It’s no secret that today’s housing market has created serious problems for many homeowners. Too many people find themselves "underwater" in their homes, meaning their property is worth less – sometimes much less – than what they owe on it. Not only that, but with many out of work, deep in debt, or simply short on funds, homeowners are having a hard time making their mortgage payments.



The combination of these unfortunate circumstances has made many homeowners wonder whether or not it is worth it to even keep their homes. And, unable to complete a profitable traditional sale, they often turn to short sale or foreclosure to rid themselves of the financial burden their home has become.



In the past, foreclosure has been akin to a four-letter word – something to be avoided at all costs, used only as a last resort. But as it’s become more common, it’s also become more acceptable, a sign of the times, a bad situation that’s happening to more and more good people. That’s why, if you find yourself considering foreclosure, it’s nothing to be ashamed about!



As popular a decision as it is, however, it is not one that should be made lightly, by any means. If you’re thinking about foreclosing on your home or property, consider some of these aspects of foreclosure before you make your decision.



1. Impact on your credit



Often considered the biggest downside to a foreclosure, the impact this decision has on your credit score will be substantial. Often, a credit score will drop anywhere from 200 to 300 points, which can quickly transform your good credit score into a pretty awful one. Plus, it typically takes seven years for the foreclosure to be removed from your credit report, which would finally allow you to start rebuilding your score. Think about big purchases you are considering making in the future, and how a low credit score might affect those purchases, before going through with a foreclosure.



2. Time



Foreclosure may seem like a "quick fix" to your problem (hey, that’s one less bill to pay!), but the reality is, foreclosures can often take six months or longer to process. While this can be good news, since it gives you more time to set up alternate living arrangements, that also means six months of demanding letters, persistent phone calls, and constant worry and stress.



3. The public nature



A foreclosure is actually a fairly public thing. It will require a public filing that can be seen by anyone. It will also most likely mean notices placed on the outside of your house when your home goes to auction. This, coupled with the fact that your family and friends will (most likely) also know about your foreclosure, might be enough to get some people to fight to keep their home. If you’re worried about any of these things, you might want to consider an alternative to foreclosure.



What are my alternatives?



Because there are so many downsides to foreclosure, many people are trying hard to avoid it. Alternatives to foreclosure, including loan modifications or short sales, might be worth looking into. Keep in mind, however, that because so many people are trying to avoid foreclosure, banks are extremely busy trying to keep up with their customers trying to complete the necessary processes for these alternatives. This backup can create financial and emotional stress for you and your family. It can also mean bad news for your credit score, since you would most likely stop making your mortgage payments while trying to complete the process.



Your best option depends on your specific case. Lucky for you, many programs are currently available that can help you either avoid a foreclosure or proceed with one smoothly. Whatever your situation, know that you are not alone, that there are options available, and that you can move beyond this rough patch and get back on your feet!