Recent statistics indicate that foreclosure filings could reach as high as 2.4 million by year’s end! Unfortunately, the impact of a foreclosure filing will follow these families around for a long time. If you have recently lost your home to foreclosure, it is perfectly natural to feel overwhelmed and depressed. It may even seem that life will never be the same again. But, one step at a time and you can get past it. This is a rough spot in the road, but like most things… it too will pass.
The immediate concern following a foreclosure is finding a new place to live. In many cases, in order to retain the home, cash reserves get depleted. Combine that with a lower credit score due to the foreclosure and a prospective landlord can be leery about approving an applicant in this situation. Here are a few options:
1. Write a letter of explanation that accompanies the lease application. Putting a story behind the current situation (along with a detailed solution) can go a long way. Don’t be embarrassed to tell the landlord that you are in the process of starting over.
2. Offering a larger deposit than is normally required (even if it is borrowed or saved for just this reason during the last stages of a foreclosure) may lessen the perceived risk to the landlord. Good personal references help as well.
3. If there is a solid income history, leasing a property at a small fraction of the total income may ease the concerns of the landlord. Families may have to adjust to housing that is not as spacious as they are used to. Try to make plans as soon as you know a foreclosure is inevitable.
Even though a foreclosure shows on your credit report for 7 years, if you have worked to re-establish some credit, most banks will consider you after 3 years. You may find that household expenses have dramatically gone down due to the reduced housing expenses. For the first time, you may be in a position to save money. This is the time to start an emergency fund. The rule of thumb is to have at least 3 months of living expenses.
This is the time to start on a new financial plan… one that includes a college fund if you are raising a family and adequate life insurance to protect your loved ones. Start putting aside 10% of your income every month and in a few years you can have enough to use for a down payment on your next house! Focus on learning from the mistakes of the past, because they are just that – PAST. Move forward and quit blaming yourself or others for what has happened. The future is limitless… filled with opportunity.
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