Living through Foreclosure

You can battle your way back after suffering a foreclosure. Here are six tips on how to overcome the setback.

Life after Foreclosure

Foreclosure causes a great deal of emotional and financial agony, without question. It’s unnerving to lose your home, have your entire life uprooted, and also watch your financial reputation crumble at the same time. However, experts say that even victims of foreclosure will eventually become homeowners again, which means they will need low term home loans. Here are some tips on how to move on after you’ve survived a foreclosure:

1. Looking for a new home. The biggest problem after foreclosure is finding a place to live. More than likely, most people will have to stay in a rental property for a while before they can begin looking for low term home loans. Even if you have good credit, getting a landlord to accept you when you have a history of foreclosure on your credit report might get your application rejected. To make the cut, you may have to pay a higher deposit.
2. Dealing with the credit aftermath. After you default on your mortgage, your other creditors will see this as a sign that you are likely to default on your other loans as well. Creditors usually have a default interest rate that could be as high as 30% with credit cards. If the foreclosure is the only blemish on your credit, you may have a good chance of restoring your credit in two or so years.
3. Buying a new home. Some mortgage issuers have recently increased the waiting period that people with foreclosures must endure before they are eligible for new low term home loans. With some lenders, this could be as much as five years. For many buyers, the most accessible mortgage option might be to get a federally-insured FHA loan. You can get approved for an FHA mortgage three years after foreclosure.
4. Explaining to your potential employers. Losing your job as well as your house is a doubly hard ordeal. But you shouldn’t have to worry about having to explain your foreclosure to prospective employers unless you’re applying for a job where you deal with money. Your financial responsibility, as manifested on your credit report, might affect your ability to get jobs like a cashier or an accountant.
5. Dealing with the tax bill. As if losing your home were not enough, you will also be stuck with the taxes on the value of your home that your lender couldn’t recover through the sale. Adding this debt to your plate may make it seem like low term home loans are never going to be viable in your future. However, the IRS has a record of discharging taxes on forgiven debt if you can prove insolvency.
6. Coping with the loss. The psychological damage done from losing a home and having to leave your beloved neighborhood cannot possibly be quantified. One report indicated that up to two million children are likely to be affected by the foreclosure crisis, including having to switch schools mid-year and more. The good news is that the number of foreclosures happening these days makes it less shameful and more common, which could help lessen the stigma.