A foreclosure is a traumatic experience. It is a legal process where the homeowner loses his home to the bank or lender.

If a borrower cannot make payments and defaults on his mortgage, the lender repossesses the property. The borrower may still owe for the difference between the amount of loan and the home’s fair market value. This is called a deficiency. In some cases the lender may forgive the deficiency. However a forgiven deficiency by the IRS is considered income and is taxable.

A foreclosure should be avoided at all costs to a homeowner.

Emotional issues may have played the part in getting a homeowner behind on payments. These issues may have resulted in a homeowner facing foreclosure.

These issues are tough enough to deal with. However a foreclosure could be tougher. The borrower will pay dearly for a foreclosure in many areas of their lives besides the emotional aspects. Listed below are five reasons why to avoid foreclosure.

Homeowners with a past foreclosure have to disclose the foreclosure on many applications and forms for the future. Job applications ask this question on their applications. A homeowner will always have to disclose they have had a foreclosure on any mortgage application.

Homeowners with a foreclosure suffer lower credit scores by three hundred points or more. A foreclosure will stay on your credit report for 7-10 years. This is the hardest item to repair on a credit score. This can affect your ability to obtain loans, get housing with credit check required, get car loans and apply for credit cards.

With a foreclosure on a record, security clearance can be damaged with jobs in the military, government and police force. There are cases where a job will be revoked due to this mark.

There are many options available to homeowners in a financial bind facing foreclosure. Talk with your lender or a real estate professional to search out the best option for your situation.

Remember, foreclosure should be a last option.