The answer is YES it will damage your credit. There are options out there and every option should be explored prior to going into foreclosure. A short sale is a better idea, but it still hurts your credit rating and usually is a long and tedious process. All in all - if you can avoid it, DO!
We list bank owned properties for several banks and they never want to displace anyone from their home, ever. It costs the bank a lot of money to have a customer go into foreclosure and they try to avoid it at all costs. They will work with you to try and find a solution. Words of advice though, don’t wait months and months before letting the bank know of your situation. Right when you know that you are going to have a problem making a mortgage payment, call the bank. Be upfront and honest with them from the start and hopefully you’ll both be able to find a solution to keep you from going into foreclosure. Good luck James! - Tue Sep 15 2009, 18:09