Homeowners who face foreclosure typically see a big hit in their credit score, which can make getting back on their feet more difficult after the dramatic event of losing their home. Understandably, homeowners have been fighting to save their home in a variety of cases across the nation, but there are instances where the loss of a homeowner’s house is simply unavoidable. Yet, foreclosure alternative plans have been made available to aid homeowners by allowing them to forgo the foreclosure process and possibly avoid seeing a substantial drop in their credit score.
Foreclosure alternative plans like short sales or deed in lieu of foreclosure plans do still affect a homeowner’s credit score and, typically, the homeowner will see a decrease in most cases. However, there have been instances where homeowners who have participated in a foreclosure alternative plan has seen themselves exit the process in a better financial position than homeowners who simply faced a traditional foreclosure.
Homeowners who have suddenly come upon a difficult financial time as a result of unemployment or other employment difficulties, may be viewed as a safer risk for a mortgage in the future if they previously had a good credit score but entered into a foreclosure alternative program once they were unable to meet their monthly mortgage payment obligation.
While foreclosure alternative plans are no guarantee when it comes to avoiding a hit to one’s credit score, they can be seen in a more favorable light by many mortgage lenders in the future. While homeowners who have successfully used one of these foreclosure plans may have to do some work to get their credit score back to where it was, these options for homeowners do offer a more promising future than cases where a homeowner simply strategically defaults and walks away from their home loan.