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How will my credit score be affected if I foreclose on two inv. prop. but keep paying primary home?

My husband and I have three properties two are investments and one is our primary home. All of which are worth half of what we bought them for and the two rentals don't generate enough to cover mortgages, HOAs, taxes and insurance. If we do a shortsale or foreclosure on the two investments but keep paying our current home how will our credit be affected?
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October 26 2010 - Terrace Park
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Answers (9)

Amazingly your credit drop is due to missed payments, which in some instances can be 12 to 24 months before the foreclosure occurs on the steps of court house in which the properties are located in.  We have helped hundreds of clients short sell homes, in which there credit was just as bad as if they foreclosed, the BIGGEST difference was the client/homeowner had control of the deficiency balance,  which is some states allows the lender to chase you for judgement on this and that judgement can last for 20 years, and will likely be collected when you sell your primary or hit the lottery or get your job promotion, a lot of Good financial times can occur in 20 years, giving the judgement holder plenty of opportunity to collect.  In a short sale situation you can deal with the deficiency during the negotiation of the short sale.  As it is an investment you are collecting income from rents I assume.  You need to pay the HOA dues, with that put the rest aside and complete a short sale and give the income you have earned back in trade for deficiency balance waiver.  It is a long and tiresome process, but hire the right people, you will be happy.  I use a third party vendor to negotiate all my short sale listings CapitalOneMitigation, they have done right for me and many others.   
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December 06 2010
Foreclosure always will have a greater effect on your credit than a short sale will, as well as your ability to buy again down the road.  A short sale will show on your credit report "settled for amount less than owed" - like a credit card that was settled - whereas a foreclosure is like a giant red X on your credit report and may mean you cannot buy again for at least 10 years (with a short sale it could be more like 2-5 years).  It greatly depends on how many months you are late - the more 30, 60, 90 days late you have, the more it will impact your score.  The best scenario is if you can short sale both and not go too many months late, hire an agent that knows how to complete a short sale quickly.  Hope this helps - read more on this topic here.
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December 03 2010
Your credit will drop to somewhere in the 400 - 500 range if you do not make payments.  I am assuming this will be the case since a foreclosure cannot occur with payments being made timely.  Keep in mind you additionally will not be able to attain new credit at going rates once your scores drop.  If you can short sell while still making the payments (best option although as credit does not get hit- I do not know how likely due to banks not readily negotiating when payments are made on time)
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October 27 2010
Florida is a lovely state. It's also one of the states where a lender can come after you for deficiency judgments if you foreclose on a property.

And they have up to four years to file a deficiency judgment.

What is a deficiency judgment? It's when the home that is foreclosed on sells for less than the value of the mortgage. The lender can go after you for the difference.

This is why it often makes more sense to attempt a short sale on a home. And with that short sale you make sure the lender provides you with a letter of satisfaction that will prevent them from attaching your assets after the fact.

I would urge you to contact an attorney before allowing these properties to go into foreclosure. Otherwise you might end up with a lien on your primary residence and any other assets you might own.
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October 26 2010
Profile picture for wetdawgs
Two foreclosures or two short sales?   yes, indeed, this will be a significant impact on your credit score.  In addition, you will not be able to get another mortgage for several years. Note: to qualify for short sales you must demonstrate hardship, and simply being under water is not hardship.  Loss of income (layoffs), medical issues, death, divorce etc may contribute to your arguement of hardship.

As you have other assets, it is also possible that the lenders will go after the others assets.  you don't have the advantage that this is your primary residence.
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October 26 2010
The agents here are absolutely correct that short selling is by far a much better option than foreclosing.  As far as how much your score will drop, that is an answer that no one could possibly ascertain.  It depends upon your entire credit portfolio, not just the short sale or foreclosure.  Assume your scores will plummet like a rock initially, but can be build back up if you keep debt minimal, don't close any accounts (assuming you won't be able to open any) and don't have any additional derogs.  Best of luck!
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October 26 2010
Dear Temple Terrace Owner,

2 foreclosures will devastate your credit for at least 7 years, maybe even longer, especially if you have judgements placed against you by the bank for the difference you owe and what the bank sells the properties for. My advise is to short sale the Temple Terrace homes. For our sellers who have completed short sales and stayed current on their mortgage, we have seen a 60 point drop in their credit score (however for 2 short sales it might be double). If the bank refuses to do a short sale, then the next best alternative is to give the home back deed-in-lieu of foreclosure.

Michael Valdes
e-Pro Realtor/ Mtg Broker, TRC, CPMS
Certified in Distressed Properties
Keller Williams Realty
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October 26 2010

If you allow the investment properties to foreclosure, yes your credit is affected.  You will not be able to apply for a mortgage loan (3 year FHA - 7 years conventional).  Your credit score will be affect, at lease a 200 point drop.

I've successfully negotiated short sales for investors.  I highly suggest you research the area for a short sale specialist.

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October 26 2010
There doesn't seem to be any exact formula for how far your credit score will drop when you stop making mortgage payments. I have heard anywhere between 150 to 200 points, but have no factual data to support that claim. I can tell you that I have had a few clients tell me that their scores dropped 140 and 160 points respectively after they completed their short sales. You may want to contact one of the reporting agencies and see what their opinion would be.
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October 26 2010
 
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How will my credit score be affected if I foreclose on two inv. prop. but keep paying primary home?
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