Qualifying For Home Loan After Mortgage Charge Off

Qualifying For Home Loan After Mortgage Charge Off Was Written By Jesse Smith

Advice On How To Qualify For Home Loan After Mortgage Charge Off:

Losing everything you’ve worked for your whole life can happen at any time. One minute you are enjoying your new home and life is good then all of a sudden there is a knock on the door, someone with a summons which is a notice of foreclosure. You lose your job and are not able to keep up with your payments and the payment arrangement the mortgage lender provides are over your budget. After everything is over the mortgage lender can charge off the remaining debt you owe. While this may seem hopeless but we will be discussing what happens. We will cover on qualifying for home loan after mortgage charge off.

 What Is A Mortgage Charge Off

When a mortgage lender writes off the unpaid debt for tax purposes it is called a mortgage charge off. Not all home foreclosures results in mortgage charge offs. In the event the value of your property exceeds the amount you owe the proceeds from the sale may pay off your outstanding debt and the mortgage lender will be paid in full so there will be no deficit. However, most foreclosures, the mortgage lender will be taking a hit and there will be a deficit after the foreclosure of the home is finalized.  If not and you owe more than what the home is sold for the you may be legally responsible for the deficient balance. If you can’t pay the mortgage balance deficit, the mortgage lender may charge the remaining mortgage loan balance off and claim the debt as a loss for tax purposes and zero out their books. This is what you call a mortgage charge off.

Liability After Mortgage Charge-Off

Don’t think just because your mortgage lender has charged off the remaining debt you in the clear of any liabilities. A mortgage charge off is just a term the mortgage lender uses in accounting. Even if the mortgage lender writes off your charge off as a loss on their books, you still owe that mortgage loan balance even after the property is taken away from you via foreclosure and the foreclosure is finalized and sold. Banks can still contact you and attempt to collect the unpaid balance. The mortgage lender may also sell the debt if they cannot collect from you or are unable to locate you. Sometimes mortgage lenders just don’t have time or the resources to continue the collection process. They then sell the debt to a collection agency who has the resources to attempt to collect the charge off.

Credit Damage Due To Mortgage Charge Off

People who had a prior mortgage charge off will have negative and their credit scores will drop by almost or more than 100 FICO Points. Your credit scores and credit rating will take a major hit with a foreclosure but what can cause even more damage is a mortgage charge off after a foreclosure. Other mortgage lenders may take that the foreclosure and charge off show that you refused to work with the bank to resolve your debt. While this may not be your intention that will be the perception. It remains to be seen the damage your credit report but the higher you’re rating before the greater the damage that will happen. Your credit rating will be affected for seven years after a foreclosure and charge off.  You might be asking how will this affect me purchasing a home in the future. You can qualify for a home loan after a mortgage charge off. With FHA mortgage lending guidelines, qualifying for a FHA loan after a mortgage loan charge off is three years from the date of the charge off. Fannie Mae and Freddie Mac Guidelines in qualifying for a conventional loan after a mortgage charge off account is seven years from the date of the charge off.

Legal Consequences With Mortgage Charge Offs

While a foreclosure is damaging to you credit as well as your credit scores,  a mortgage charge off  accounts will be worse. Not only is the foreclosure reporting on your credit report, but the charge off account is reporting it too which is a double hit. What has to be avoided at all cost is a lawsuit which can turn into a judgment. You have to double check if you live in a state that prohibits mortgage lenders from suing you after a foreclosure on your primary home. Whoever owns your charge off account has the legal right to take you to court over the unpaid charge off collection balance. You could face asset seizures, wage garnishment and bank levies if the charge off creditors wins.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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