Facing foreclosure on your home can be one of life’s biggest challenges. You have options if you want to save your home, but sometimes allowing the foreclosure to take place is your best option. If you have to let go of your home, here’s how to recover from foreclosure.
Settle in and settle down
Lots of activity happens both before and after foreclosure. The process can be slow or can move very quickly. Sometimes months can pass without anything happening. Then much can happen within a matter of weeks.
Before the foreclosure takes place, you may be engaged in litigation. You may be attempting to prevent the foreclosure through loss mitigation, like modification or reinstatement. You may be exploring options for a new place to move.
After the foreclosure takes place, you must find a new place to move. And you must move. You have to update your driver’s license and change your address with banks and employers. Foreclosure can make it feel like your world has been turned upside down, or perhaps even inside out.
What comes next? You have to settle in and settle down. Take the time to settle in to your new home. Then settle down, take a deep breath, and take stock of what led to the foreclosure. Get all of the foreclosure documents together and put them in a folder. Then put that folder in a drawer and move on with your life.
Rebuild your credit
First and foremost, determine how to deal with any deficiency left on the mortgage balance. Your mortgage lender can either forgive the deficiency or pursue you for the balance. Dealing with the mortgage deficiency is an important part of rebuilding your credit. You cannot recover from foreclosure if you are still paying the mortgage for a home you no longer own. If a foreclosure remains on your credit report for more than seven years, you should request its removal.
And while you’re at it, clean up your entire credit profile. Do not rely on a credit monitoring service. You have to personally control the process of rebuilding your credit.
Qualify for another mortgage
You will be able to get another mortgage after a foreclosure if you take the right steps to recover from the foreclosure.
In today’s market and under current underwriting guidelines, you may qualify for a mortgage more quickly than you think. Take the time following the foreclosure to save up as much as you can for a down payment. The more you are able to bring to the table, the lower your principal and interest rate will be. And the lower your interest rate, the lower your monthly payment.
Following a foreclosure, you will qualify for a mortgage within 3-4 years. Be patient, rebuild your credit, and save up your down payment. If your goal is to become a homeowner again, it won’t take forever. Keep your eyes on the prize and you’ll be in your own home again within a few years.
Recover from foreclosure
Often the most devastating effects of a foreclosure are psychological. If you can convince yourself that you can — and will — move on, often that’s the toughest part of the task. Settle in, settle down, rebuild your credit, and you will recover from foreclosure.