While the economy may be getting better, there are still many Americans who are feeling the impact of the recession. While some are struggling to find jobs in their field of interest, others are coping with other financial implications like figuring out what to do after a foreclosure.
Deciding to leave your home or not being able to pay the mortgage is devastating. How you pick yourself up afterwards can be challenging and also rewarding. Your credit will be impacted negatively for a period of time and here’s what you can do:
- Run Pull your credit reports from each reporting agency at least once a year using annualcreditreport.com.
- Monitor credit monthly using the FREE creditkarma.com. This is only one bureau (Trans Union) but it doesn’t require a credit card and is truly free monitoring.
- Pay your bills on time. Missing payments is the most damaging thing you can do to your credit. This Building as much positive credit history as you can after a derogatory eventalone will help rebuild your credit scores. whether it has suffered due to foreclosure or other financial decision.
In some states you may receive a 1099 tax form from the bank for the difference between the mortgage amount and the amount the home was sold for at auction. For example, if you had a mortgage of $200,000 and the property was sold at auction for $150,000, you would receive a 1099 showing income of $50,000.
You may have trouble finding a new home to rent. (Yes, you will be renting for a period of time.) If you can explain the foreclosure with a job layoff, for example, then you it might be able easier for you to rent easier than someone who just walked away from their home. You may also be able to have the option of paying a higher security deposit or monthly payment to secure the property. Basically, the landlord wants to know they can trust you to rent their home in spite of the foreclosure on your credit report.
The state of your credit post-foreclosure (and for many of us post-recession) won’t last forever. The minimum time between the completion of a foreclosure and when you can be approved for an FHA loan is as little as three years or as many as five years based on your credit history during that period of time. In other words, if you’re paying your debts, you’re more likely to get a mortgage sooner.
While the waiting period can be frustrating, there is light at the end of the tunnel and you will be able to purchase another home. In states with foreclosure anti-deficiency protection, we usually see inaccurate reporting of the foreclosure. The bank will typically report a deficiency balance (the difference between what you owed and what the house sold for at auction), whether the debt is actually owed or not. We have a lot of expertise in this area and will be able to determine whether your foreclosure is reported accurately or not. We have programs that will either correct the reporting or remove it completely, depending on what your situation requires. This effort can sometimes require the help of one of the attorneys we work with and is usually no additional cost.
If you are interested in learning more about how a foreclosure impacts your credit and what options you have to recover good credit, please schedule an appointment with Go Clean Credit today!