Getting Back on Track After Foreclosure

Bouncing back from foreclosure is no easy feat, but it is possible to regain your financial footing.

Losing your home to foreclosure is a difficult experience, but you have several options to get your finances back on track that may even put you in a better financial position than when you started.

Finding a New Place to Live

During foreclosure, the first thing you’ll want to do is find affordable housing for you and your family. Keep the following tips in mind as you consider your options:

• Talk to your lender. Ask your lender if they can offer an arrangement that would allow you to rent back the same home you lost to foreclosure.
• Housing assistance programs. If your lender needs you to leave the house, there are programs available to help with relocation expenses, and sometimes cash, to help you vacate the home and leave it in good condition.
• Rental housing. This can be a good option following foreclosure, but keep in mind that you will need enough money to cover a security deposit and first month’s rent. If your credit is damaged, you may be asked to pay more for a security deposit.
• Rent to buy. If you want to become a homeowner again in the future, you may consider leasing a property with an option to buy.

Rebuilding Your Finances

Once you’ve found a place to live, closely examine your financial situation and think about what you and your family need to live and how much debt you need to repay. Getting back on track will require proactive saving and spending. Follow these tips for creating a budget:

• Determine your monthly net income, which is what you make after taxes and payroll deductions.
• List all your fixed and recurring expenses, such as rent, utilities and your car payment.
• Plan ahead for expected major purchases. 
• Plan for the unexpected by building an emergency fund that lasts at least three months.
• Establish short- and long-term financial goals.

The most important work you’ll face after a foreclosure is rebuilding your credit. Although foreclosure has a negative impact on your credit score, it’s worth remembering that foreclosure is only a single item in your credit history.

Every time you use credit, make payments and add more entries to your credit history, the overall impact of foreclosure on your credit score decreases. Credit scores are not set in stone, and you are able to rebound from foreclosure — maybe sooner than you think.

Follow these tips to regain control of your credit and finances:

• Pay your bills on time.
• Keep credit cards and revolving account balances low.
• Pay off debt as soon as possible.
• Request a copy of your credit report at least once per year to monitor your progress and identify areas to improve.

Planning for the Future

Your last homeownership experience may have ended in foreclosure, but you should not assume you’ll never own a home again. Homeownership still has all the benefits you found attractive initially, and next time around, you can be better prepared for the costs of owning a home.

By establishing short- and long-term goals and staying focused on making consistent progress, in time you’ll be back on track and ready for your next housing opportunity.