How will foreclosure, deed in liue, bankrutpcy affect my credit?

Question

We are three months behind on our interest only mortgage payments and other bills. It was difficult this last year since my husband and I lived in separate places due to work and had seperate living expenses. We paid a high mortgage payment on the house and rent for the apartment. we stopped making payments when we had decided to file for bankruptcy but now I find that I may lose my Security clearance and job if I file bankruptcy, and I'm under contract with my job. I have yet to clarify that, but my real question is, is foreclosure/deed in liu better than a bankruptcy? A government financial advisor stated forcl. would be much better than a bankruptcy ch.7 creditwise. We want to open up businesses in the next 3-6 years, and buy another house in that time frame also.After filing bankruptcy it was projected that our credit score would go up 50 points right away. Will a foreclosure really kill our credit by 100-150 points?How long will it take us to get back to the 700 credit score we ha

Answer 1

I know bankruptcy will affect your credit.  It will pull your score down.

Never dealt with foreclosure or deed in lieu.

Answer 2

Your credit will take a hit if you file bankruptcy or foreclose.  Neither is a good option.  The following guidelines are the current Fannie Mae requirements before you can be approved for a home loan again:

Chpt 13 bankruptcy: 2 years from discharge date or 4 years from dismissal date

All other bankruptcies: 4 years from either the discharge or dismissal date

Foreclosure: 5 years from completion date; additionally between 5 and 7 years you can only purchase a personal residence, and must have a minimum of 10% down and 680 credit score.  Also you can only do limited cash-out; no regular cash-outs are permitted.  After 7 years you're back at square one.

Deed in lieu: 4 years from completion date; also 10% down payment required between years 4 and 7.

Short sale: 2 years from completion date.

There are extenuating circumstances that can reduce some of these, but they better be really good.  Obviously your best bet if you are going to lose your home is a short sale, if you can do it.  If you are going to file bankruptcy, file chapter 13 if you can.  I don't believe you can include a home in a bankruptcy though.  Filing bankruptcy will freeze your assets (including your home), but once it is complete they will continue to foreclose (double check that!).  If you are trying to complete a short sale, you will NOT be able to if you file bankruptcy.  Wait to file it until after the short sale is complete.  And talk to a bankruptcy attorney who understands short sales/foreclosures.  You wouldn't believe how many of them give horrible advice or make extra money at your expense by using the high cost of the house in their favor... or just have no idea what they're talking about!  Good luck- hopefully things will work out for you.

Answer 3

You didn't really state besides your mortgage what other bills you are behind in. If it is only the mortgage take to the lending company about doing a "Short Sale" this is where the bank will let you sell the home for less than you owe and write off the rest of the loan, the reason for them doing this is if the home it foreclosed and goes to auction they will probably get less for it. I just bought a home on short sale the bank excepted less than the previous owners owed.If you have an attorney they should have mentioned this to you.