Many homeowners experience foreclosure as the end of a long, tumultuous process—oftentimes beginning with a job loss. They fall behind on their mortgage payments, perhaps make unsuccessful attempts at a government-assisted loan modification, and then finally accept that foreclosure is inevitable. The average borrower who loses a home to foreclosure has gone 14 months or more without making a mortgage payment by the time their home is repossessed. After a foreclosure, many former homeowners realize that losing their house is just the beginning—they now face the uncertain process of rehabilitating their finances, credit, and self-esteem.
If you’re on the verge of a foreclosure, there are a few things you can do before, during, and after the process to help ease some of the pain:
1) Get a roof over your head. Before your mortgage holder confiscates your home, locate and secure affordable rental housing. This will help ease the transition, especially for any children involved.
2) Boost your income. If you’ve lost your job, work on locating new sources of income, whether through unemployment benefits, a temporary job placement, or part-time work.
3) Regroup emotionally. It’s a tough time for everyone involved, and foreclosure can be especially hard on a marriage. Don’t blame yourself or other family members for your predicament. Commit to working as a team to rebuild.
4) Educate yourself. Now’s the time to learn what you don’t know about personal finance. Learn the intricacies of how loans work. Study how credit scores are calculated. Keep reading BLACK ENTERPRISE.
5) Seek counseling. Many organizations offer free counseling to help those recovering from foreclosure. Try GreenPath Debt Solutions, CredAbility.org, or locate a federally approved advisory service in your area through the U.S. Department of Housing and Urban Development.
6) Draft a budget. With the help of a debt counselor or financial planner, create a budget for your new living and financial situation. Many former homeowners will also want to begin saving for the day when they can buy a home again.
7) Repair your credit. You’ll need to create a detailed plan that includes specific amounts and timetables for attacking all debts, including any residual balances from the foreclosed home, such as utility bills or property taxes.