Foreclosures aren't rare anymore. Almost all of us know someone who has faced such a situation. The doom in real estate along with the economic recession has forced many people to fall behind on their mortgage payments and eventually to face such an event.
However, contrary to popular belief that you have little hope of rebuilding your credits after a foreclosure, you need to understand that all is not lost, and with a good financial plan, you can still change your life for the better.
What Happens after Foreclosure
The alarm bells for foreclosure start ringing when you first miss your mortgage payment. Mortgage payments can greatly influence credit scores. When you skip your mortgage payment, your credit score plummets by a whopping 100 points.
However, apart from the damaged credit ratings, it is the nagging feeling of homelessness that makes people lose their sleep. The possibility of losing a home may be hard to comprehend for some. Further, the recent second mortgage laws have made it even more difficult to find a new home with second mortgage.
A predefined period needs to lapse between the two mortgages for the person to become eligible for another mortgage. Thus, finding a shelter becomes a priority for families who face foreclosure, as homeowners are usually made aware of this possibility a few months prior to the actual event.
Problems after a foreclosure don't remain limited to finance, oftentimes, families are ripped apart due to a fall out between the spouses over the financial crisis. Some people also experience hostility from friends and society following such an event.
A foreclosure can also doom people's chances of better employment, if their employer runs a credit check on them. Renting also becomes a big hassle as very few landlords allow tenants with a history of foreclosure.
Often, double security or deposit is also insufficient to tame the spooked landlords. Higher interest rates on loans and higher premiums on insurance are some other financial woes that come with such an event.
Plan Your Life After Foreclosure
Always remember that those who overcame these obstacles and emerged victorious against all odds, often planned their life meticulously after this major setback in their lives. There is no point in brooding over mistakes and making yourself or your family miserable.
Learn a lesson from those mistakes and move on. However, do analyze what went wrong and how the situation could have played out differently if you had not made the choices that you did. This will prevent you from repeating those mistakes in the future.
The biggest strength while facing a foreclosure comes from your family. If the whole of your family stands as one in this situation of crisis, there is nothing to stop you from regaining control of your life.
After such an event, finding a new home must be your first priority in order to make your family feel safe. If finding a new rental home which suffices your requirements is not possible, then be prepared to make small sacrifices.
For instance, you may have to live in a modest home for a few days, or you may have to move away from your neighborhood. Taking all the family members in confidence may help in coping with this situation.
Following a foreclosure, you will still have your bills and accounts to take care of. If you are out of a job, make that your second priority. Do not wait for a decent job to come along, instead, get on whatever job you can currently catch hold of.
Diligently pay all your bills on time and keep your accounts up-to-date. To improve your credit score, it is necessary that you have at least 3 credit lines clear for 36 months. This will also make you eligible to apply for low interest loans.
After a few months of frugal living, you will have earned enough to make a down payment on your new home. By this time, your credit score will also have improved and getting a mortgage loan wouldn't be a problem.
Thus, patience and perseverance is the key to leading a good life after foreclosure. Remember, such events need not always spell doom, and may provide an opportunity to learn from your mistakes and start over.