We are in one of the worst economic downturns in a couple generations. Not only is the stock market down big time, and the unemployment rate is approaching 10%, but people are losing their homes left and right. I wanted to take a look at just how bad a foreclosure can hurt your future chances of getting a mortgage that is actually worth your while. As you know, you will likely not be able to get another loan for about 7 years after you have foreclose on your current home. Once you do, however, if your credit score is too low, you will end up paying a truck load more than a person with a perfect credit score would have.

For instance, if you want to take a mortgage out for $200,000, but have a credit score of 430, you would need to apply for a bad credit mortgage loan. These loans are for people with terrible credit, looking to re-establish themselves financially. The problem is that these loans will usually be 4-6 % higher than a person with perfect credit would pay. Over the life of a 30 year fixed rate loan, for $200,000, a person who needs to pay 5% more then the prime rate will be losing about $275,000 over 30 years.

This means that if your credit score is in the low 400's at the time of your loan approval, you are going to pretty much lose $275,000 over 30 years compared with those with good credit. That's a ton of money that you basically are throwing away. If I was in that situation, instead of diving head first into another mortgage, I would rent a property, and try establishing credit, rebuilding my score with smaller loans on vehicles, and other everyday needs. Take your time and never rush into anything. Make sure to see a financial adviser before signing any loan documentations. I have seen people get in more trouble the second time around than they were in with their first foreclosure. It's a vicious cycle, and you must rebuild your credit slowly, instead of rushing into a new mortgage on a new home.