A foreclosure is not proof of a character defect!
The process of having your home taken away from you is demoralizing and demeaning. Homeowners are treated like credit criminals. Employees working in foreclosure departments often treat the debtor with disrespect and disdain. Yet many foreclosures are the result of some catestrophic event in the home owner’s life. Serious medical problems, loss of income, death of a spouse and divorce in a tough real estate market are all common situations that can lead to the loss of a home.
Despite the fact traditional mortgage lenders may not have an interest in working with you in the time following foreclosure, rest assured that there is an active, professional goup of lenders looking for your future business.Â
While many lenders may refer to your situation as ‘credit-challenged’, other more creative lenders propose an entirely different and refreshing perspective. Countless lenders in the subprime mortgage industry agree that individuals who have endured financial mishaps, are among the most appreciative and loyal clients they have. The subprime mortgage lender will not have the ability to offer you the lowest rate available due to your credit history, however, if you take a sufficient amount of time investigating the numerous available loan programs, you may be surprised to find lower-than-expected and competitive rates. And no matter what type of financing is acquired, the significant tax benefits of home ownership remain the same for all borrowers.
Among the various and imperative things you will need to do post-foreclosure, is begin the credit rebuilding process right away. It is simply impossible to start this course of action too soon.  Many mortgage lenders recommend that you take a two-year loan break and focus on credit concerns. Be certain that you make payments to any and all creditors on time; perhaps even early. Make every possible effort to avoid credit card balances; if you rely on your credit cards for monthly necessities, attempt to pay your balances in full at the end of each and every month. Often times consumers assume closing unused credit accounts will raise their credit score, on  the contrary, it is better that you simply do not use these sources of credit, but maintain them in good faith. Closing accounts can, in many cases, lower your already fragile credit score. Your focus point should be maintaining adequate employment, a satisfactory rental payment pattern, and optimal credit responsibility. These few, but vital suggestions alone, will help you get back on the road to home ownership.
Here are the basic things to do to ensure the shortest amount of time between a foreclosure and the purchase of a new home.
- Credit cards — If you have one or more open accounts and can afford to keep them, pay promptly every month. In order to achieve the highest possible credit score, keep your balances at 30% of your available credit limit.
- Rent payments — Make sure this is the first thing you pay every month. Your rental payment history will be a big factor when you apply for your next mortgage.
- Other credit — Pay on time. If finances are very tight, make sure you pay each payment within 30 days of the due date. You may have to pay a late fee for late payments, but late payments are not reported to the credit bureaus unless the are 30 days or more late. Paying a bill 8 or 10 days late will not show up on a credit report.
- Savings — Begin a savings account immediately. Even a small amount of money deposited each month will add up in 24 months. These “assets” will be carefully reviewed when you apply for your next loan. Set a target of 2 full months of mortgage payments in the account. Once you have accumulated that amount, begin saving for closing costs.
- Payroll taxes — Review what is being withheld from your paycheck. If you are receiving a tax refund at the end of the year, you should consider changing your deductions. It makes no sense to offer Uncle Sam an interest-free loan while you struggle.
- Establish new credit judiciously — You will get credit offerings in the mail. Ask yourself first if you really need these credit sources. You really don’t need a bunch of credit cards to have a strong credit profile and there may be more efficient ways to build a good credit report quickly.
Foreclosure can be a emotionally crushing experience. But it is not the end of the world. A baby may take very small steps but, string enough of those steps together and you can cover quite a distance. The time after foreclosure is a time for baby steps. They will add up.
