Introduction

Going through a foreclosure can be extremely stressful and difficult. You can, however, take advantage of this opportunity to make a fresh start with your personal finances. This guide is designed to provide you the necessary tools to get on top – and stay on top – of your finances.

Chapter 1: Housing

Most people become renters after experiencing a foreclosure – purchasing another house right away is usually not feasible. However, since a foreclosure appears on your credit report and most landlords check credit reports, finding a rental is not always a piece of cake either. The best thing to do is be honest and up-front with potential landlords. Explain why you were unable to keep up with your mortgage payments, and why paying your rent won’t be a problem (e.g., your mortgage payment increased and the rent is much lower, you were out of work for six months but have a job now). If you have a positive payment history for other bills, such as a car loan or utilities, mention it. Offering a higher security deposit, if you have the cash, or a co-signer with a positive credit history can also help. (They don’t have to live with you – just sign the lease, which makes them on the hook for rent payments if you don’t pay. Of course, you’ll need to find someone who is willing to be a co-signer.) Individual landlords are often more flexible and willing to overlook a foreclosure than a management company running a large apartment complex.

What if you have to move out before you can find a new place to live? You may have friends or family you can stay with temporarily, but if that is not an option, investigate what emergency/transitional housing is available in your community. You can contact your local information line (in many locations, you can get a directory of social services by dialing 211 or 311) or HUD (US Department of Housing and Urban Development) at 800-955-2232 or www.hud.gov/homeless/hmlsagen.cfm.

You may not be able to buy a new house tomorrow, but if you want to be a homeowner again in the future, it is possible. Typically, you will need to wait several years after a foreclosure to qualify for a new mortgage. In the meantime, it is a good idea to work on improving your credit score and paying down your debt (discussed more later) – regardless of whether or not you had a foreclosure in your past, it is generally easier to get a mortgage if you have a good credit score and low debt load.