Owning a home is one of the biggest investments many Rhode Islanders will make in their lifetime. Purchasing a home is a major accomplishment and can be seen as fulfilling the “American Dream” for many people. That being said… owning the wrong home in Rhode Island can lead to significant damage to your credit if you over-extend yourself financially. This is especially true for homeowners who are struggling to pay their mortgage or for those who have purchased a home which does not fit their budget. As much as purchasing a home is an emotional decision, it is equally a financial decision – set yourself up for success by approaching the transaction from a fiscally rational perspective. In this article, I will discuss five ways owning the wrong home in Rhode Island can damage your credit.
1. Late Mortgage Payments
One of the most significant ways owning the wrong home in Rhode Island can damage your credit is through late mortgage payments. If you have missed a payment and are unable to make your mortgage payments on time, your credit score will take a major hit. Not only will your credit score suffer, but your lender will likely send you legal notices in the mail and begin the foreclosure process – which eventually ends with you losing your property. Late mortgage payments stay on your credit report for up to seven years and can significantly lower your credit score, making it harder for you to secure credit in the future.
Late mortgage payments are usually a symptom of unexpected life circumstances or poor budgeting…if you are late on your mortgage payments in Rhode Island, there are still options available to you before foreclosure sets in…feel free to reach out by 401.684.3937 or by filling out the form at the bottom of this article. Owning the wrong home in Rhode Island can damage your credit – at Home Tree LLC we have the experience connections to get you back on track with your Rhode Island home.
2. Foreclosure
Further, if you are unable to make mortgage payments on your Rhode Island home, you risk foreclosure. Foreclosure in Rhode Island occurs when the lender takes possession of your home because you have failed to make your mortgage payments. If the eventual sale of your property is not enough to pay for the balance on your mortgage, you may be liable for the remainder of the original loan amount. Foreclosure can stay on your credit report for up to seven years and can severely damage your credit score. In addition, having a foreclosure on your credit report can make it difficult for you to secure credit in the future, which may mean the inability to purchase a home down the road. There are ways to avoid foreclosure such as asking your lender for a loan restructure, selling assets in order to make payments, or working with a local investor such as Home Tree and fielding a no-obligation cash offer for your Rhode Island home. Negotiating a cash sale will help you to payoff your loan balance and may even leave you with cash leftover for moving costs or the down payment on a rental property. Feel free to reach out by 401.684.3937 or fill out a form below to receive a no-obligation cash offer to “sell my Rhode Island property fast”.
3. Short Sale
Owning the wrong home in Rhode Island can also damage your credit if you end up “underwater” on your mortgage – meaning you owe more on your loan balance than your home is worth for sale on the market. If your Rhode Island property is underwater and your are unable to make your mortgage payments, you may need to consider a short sale. A short sale occurs when you sell your home for less than what you owe on your mortgage. The process usually involves negotiating with a buyer and also with your lender in order to close the short sale. While a short sale can be a better option than foreclosure, it can still damage your credit score. A short sale can stay on your credit report for up to seven years and can make it difficult for you to secure credit in the future. At Home Tree, we have options for Rhode Island homeowners who are underwater on their mortgage and are interested in selling…we have experience negotiating with lenders and with making offers on homes for short sale. In some circumstances we are able to take over the mortgage payments on your underwater Rhode Island property, thus helping you to avoid short selling and further damage to your credit. Call Matt at Home Tree LLC today or fill out a form below to receive a cash offer for your Rhode Island home. “Sell my house fast in Rhode Island”
4. High Mortgage Payments
If you purchased a Rhode Island home that is too expensive for your budget, you may find yourself struggling to make your mortgage payments each month. This can lead to missed payments, late payments, and even foreclosure or short sale. Furthermore, if you are using a significant portion of your income to pay your mortgage, you may not have enough money left over to pay your other bills. This can lead to missed payments on credit cards, car loans, and other financial obligations, which can further damage your credit score. When you have high monthly mortgage payments in comparison to your income, your put yourself in a situation where any financial interruption in your life can set off a spiral of missed or late payments. You become reliant on your source of income to fund the wrong home in Rhode Island and you end up damaging your credit and potentially losing your home. If you are thinking “how can I sell my Rhode Island home fast, for cash” Matt at Home Tree LLC will have several options and offers available to you for no obligation…and we can close on your schedule and in some cases we can close in as little as one week! Call Matt today at 401.684.3937 to get a cash offer on your Rhode Island property.
5. High Debt-to-Income Ratio
If you are using a significant portion of your income to pay your mortgage, you may have a high debt-to-income ratio. Your debt-to-income ratio is the percentage of your income that goes toward paying your debts each month. If your debt-to-income ratio is too high, it can make it difficult for you to secure credit in the future. Lenders may see you as a high-risk borrower and may be less likely to approve your applications for credit cards, car loans, and other financial products.
When applying for a mortgage, your Debt-to-Income ratio will come into consideration…most lenders will require monthly Principal, Interest, Taxes, and Insurance (PITI) payments to be 30-40% of your monthly income minus the debts you are already paying on. If you stretch your budget and decide to take on mortgage payments that are 40% of your monthly income, you will have less left over for food, utilities, credit card payments, and other monthly debt obligations.
Owning the wrong home in Rhode Island can lead to significant damage to your credit. Late mortgage payments, foreclosure, short sale, high mortgage payments, and high debt-to-income ratio can all damage your credit score and make it difficult for you to secure credit in the future. If you are struggling to make your mortgage payments or are considering purchasing a home, it is important to carefully consider your budget and ensure that you can afford the home you are purchasing. By doing so, you can avoid the pitfalls of owning the wrong home in Rhode Island and protect your credit score for the future. Would a fast sale of your Rhode Island home help you to resolve the issue? Our team can help! Reach out to Home Tree today to learn more! 401.684.3937