Foreclosure is a legal process where the lender tries to get the balance of a loan from a borrower who has failed to make the payments as was agreed upon by selling the asset that was used as collateral for obtaining the loan. The asset sold in most cases, is the borrowers home. It is a very unpleasant process for any home owner to experience and yet has become very common due to the staggering financial times.
The number of foreclosures filed by lenders is still growing however, many people do not know the implications of a foreclosure and what becomes of them after it has been finalized Here are the major things that you would have to deal with after a foreclosure.
Finding a new home
After foreclosure has been finalized you will obviously need to find a new home. This is usually not easy since most landlords check credit records and a foreclosure on your records makes them skeptical to rent to you. Secondly, raising cash for a rental deposit is usually a big challenge . However, if you have cash you could offer a higher security deposit . You could also ask somebody with good credit to co-sign on the lease. They will not have to live with you but it helps make the landlord more comfortable knowing that in case you fail to pay for the rent the co-signer will. Some individual landlords are lenient and if you are honest with them and have a good explanation for the foreclosure, they might accept you as a tenant.
In the absence of cash and also in cases where you have to move out before finding a new place to live, you will need to find friends or family with which you can stay with temporarily.
Facing bad credit scores
The foreclosure is included on your credit report and causes your credit scores to drop. This raises red flags for other creditors and they will consider you most unlikely to pay what they owe. The interest rates for credit cards of foreclosed owners can go up to thirty percent. It therefore becomes very difficult to get personal loans. However, you can take steps to improve your credit score in the shortest possible time by paying on time every time Try not to have large debts on your credit cards.
This varies depending on whether your home after the sale was able to for pay for the full amount of what you owe the lender or not. If not, you may still be required to pay the balance of the loan. It is possible for the lender to sue you and have your salary deducted. You could stop this by filling for bankruptcy but that further reduces your credit scores. You could also try to talk with the lender and negotiate a comfortable payment plan or ask for the debt to be pardoned but you may still have to pay taxes since a forgiven debt is considered an income.
Some states however, have anti deficiency laws that give you the right not to pay the balance of a loan after losing your home
buying a new home
You won’t be able to buy a new house right after a foreclosure. You will have to wait several years before you are eligible for a new mortgage. You can use the time however, to improve on your credit scores and pay down your debts to enable you get a better mortgage loan with better rates when you are ready.
Life after foreclosure can be very traumatizing However, a lot of people bounce back and become home owners again. It takes a lot of patience, discipline and determination. If you can avoid foreclosure that is all the better.