Don't walk away!

Walking away from a mortgage you can still afford to pay has many consequences, including a major blow to your credit score and more years before being able to purchase a home again.

Some homeowners believe that the credit score hit is worth getting out from a deeply underwater mortgage. After default, these former homeowners reason, they can raise their FICO scores by paying all their bills on time and eventually finance another home purchase.

Don't count on it. While homeowners who default due to economic hardship, such as a job loss or divorce, normally must wait two to five years before buying a home again, people who walk away from their mortgage have to wait seven or eight years before being able to obtain another mortgage to buy a home again.

Credit scores are only one component of a complete credit decision by a banks underwriter. Underwriters scrutinize records very closely and look at several factors in determining whether to grant mortgages, which include: the amount of money borrowers have in the bank; employment histories; payment history, credit history/scores, past mortgage defaults, etc.

If an underwriter finds no precipitating factors leading to the defaults such as job loss or health issues, the repaired credit score won't overshadow the black mark of a walkaway.

Once seven or eight years pass and a walkaway tries to get another loan to purchase a home, the lender will require a down payment of 30% down or more and be charged higher interest rates above the levels other borrowers with similar credit scores would receive.