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Can you choose walking away from your house? Yes. Are there
no consequences when you do? No. If your mortgage is
underwater and you are thinking about walking away, there
are a few things you should consider.
Credit Damage
Foreclosure will damage your credit and will do so
significantly. A foreclosure remains on your credit report
for 7 years. It will impact your ability to get any kind of
credit in the future and may even have an effect on your
current credit cards. Many apartment complexes check your
credit before renting an apartment to you so a foreclosure
could cause you difficulty in finding a new place to live.
If you try to buy another home in the future, you could have
difficulty doing so and your interest rates will likely be
higher than someone who has not gone through foreclosure.
Lenders Coming After You
In some states, the mortgage company can come after you if
the home is not sold at the foreclosure auction for what
they are owed. For example, if you owe the mortgage company
$200,000 and the home is sold at the foreclosure auction for
$150,000, your lender can come after you for the $50,000
that they are still owed. Will they actually do this? If
they believe that they can get paid, it is likely that they
will try. If you have significant assets beyond the home,
walking away from your house is likely not a good idea.
Employment Issues
If you work in the financial industry, finding employment
may be more difficult after foreclosure. Some places will
pull a credit report and can deny you employment based on
what they find in that report. This can also be a problem if
you ever need a security clearance for a job. Your credit is
something that they may pull and can factor into whether or
not you get a clearance.
Walking away from your house can cause a wide variety of
problems for you in the future. Try talking to a housing
counselor before you make the decision. They may be able to
help you work with your lender to reduce the principal
amount owed on your loan. It will depend on your situation
and on how flexible your lender is willing to be.
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