Top 5 Ways to Bounce Back After a Foreclosure

Top 5 Ways to Bounce Back After a Foreclosure

A foreclosure stays on your credit for seven years. But the effects of foreclosure on your credit immediately start to diminish once the foreclosure has been completed. The same isn’t true for people. Losing a home is tough. Here are the Top 5 Ways to Bounce Back After a Foreclosure.

Top 5 Ways to Bounce Back After a Foreclosure

1. Find the Right Place to Live

You may not be living in the home you lost to foreclosure. But you must make a home for yourself to the best of your abilities. Everything begins at home. If you are not comfortable with your living arrangements, you won’t be comfortable with any aspect of your life.

Do not splurge on housing and amenities. Instead, find a home and location appropriate to your lifestyle and family size. Find a place that you can afford, but one that you can also be proud to call your home.

2. Clean Up the Mess

If you suspect you will owe a deficiency judgment after the foreclosure, clean it up immediately. Contact the lender, negotiate the amount, then make arrangements to pay the deficiency prior to litigation. Litigation costs can add thousands to your balance.

Filing bankruptcy eliminates your liability on any deficiency judgments. Filing a bankruptcy within a close period of time to the foreclosure can lessen the effect of both events on your credit. Suffering a foreclosure, then waiting until you are sued for the deficiency only tends to extend the negative impact of both. If you have other large debts, bankruptcy may be a smart option for you.

3. Revamp Your Existing Credit

Run a credit report and take a look at the balances if you don’t know them already. Take a hard look at how you use your credit. Pay off low balances and straggling small debts that you may have lost track of while focusing on fighting the foreclosure.

About six months after you do this, close the smaller limit credit cards then wait another few months. Then ask for credit increases on your existing cards. If they do not grant the increases, close them, then wait another month or two.

By this time, you will receive offers for new credit cards. Choose one or two with the best interest rates and annual fees. Carefully examine the essential terms before you accept. Don’t just take the card with the highest limit.

4. Increase Your Income

Making more money is easier said than done. But if you want to bounce back from a foreclosure, having more income will make all of the tactics listed here a lot easier.

Maybe it was difficult for you to focus fully on your career or studies while facing foreclosure. Now is the time to make up for any lost ground. People thrive in jobs that pay them commensurately according to their abilities. Find that job and get it, if you don’t have it already.

5. Get Another Mortgage

You do not need to wait until the foreclosure drops off your credit report to obtain another mortgage. Many of my clients allow one property to go to foreclosure while maintaining other mortgage payments.

You will be able to obtain a new mortgages as soon as two years after a foreclosure. That soon after a foreclosure, you may not get the best interest rates. Whether you will qualify for a mortgage depends not only upon how aggressively you repair your credit after the foreclosure, but also how much of a down payment you are able to bring to the table.

As you can imagine, gaining the trust of a mortgage lender after foreclosure speaks volumes on your credit report.

Bounce Back After a Foreclosure, Don’t Just Sit There

Losing your home to foreclosure is demoralizing. It can be tempting to blame a cosigner, the bank, or the economy. Sometimes no one is to blame.

Of course, you should learn from mistakes. But you should try to bounce back after a foreclosure, as opposed to focusing solely on the past.

Avatar
About Brian V. Lee 566 Articles
Brian V. Lee provides bankruptcy, foreclosure defense, business turnaround, and litigation services to clients in the District of Columbia, Virginia, and Maryland. Brian was the Washington, D.C. state chair of the National Association of Consumer Bankruptcy Attorneys from 2016 to 2018.