Life After Foreclosure: How to Pick Up the Pieces

    The bank has foreclosed on your home and you’ve moved out. Now, where do you go from here? Before you move forward you have to understand a few things first. When the bank forecloses on a home there’s a lag time between the foreclosure process and the actual transfer of ownership. During this time you are still technically responsible for the house itself; this means keeping insurance enforced in case of fire, theft, etc.

    Tax liabilities are another concern for homeowners who were foreclosed on. In the past, if the bank sold a home for less than what was owed on it, the foreclosed homeowner was responsible for taxes on the difference. This was called the “write-off amount”. Tax laws changed in the mid 2000’s and there were significant allowances made that wiped away this tax liability. You must check to see what the current tax laws are so as not to have any unpleasant surprises in the future.

    Life After Foreclosure

    Contrary to what most people think, life after foreclosure is not all that bad.

    There’s more of a mental battle going on when a person experiences foreclosure compared to financial. Once a foreclosure is over you’re usually better off financially because the burden of house payments, taxes, upkeep, and the likes is over. Sometimes the thought of foreclosure is much worse than the reality; this is what creates anxiety and guilt.

    Your credit will be damaged, but in relative terms this can be repaired within a relatively short time frame after the foreclosure. You can start rebuilding your credit by getting secured loans. Any bank or credit union will gladly lend you your money back at a higher rate. You will incur an annual fee and charges for these loans, but it’s a small price to pay to get your credit profile back on track.

    You can only rebuild your credit if you use it. Banks will hold your cash deposit as collateral against the credit card they give you. Using the credit card for small purchases and then paying it off each month, for six months, is the way you roll a secure into an unsecured loan. Some banks may ask you to do this for a year, but either way you will eventually reduce your credit risk and get back into the good graces of lenders.

    Preparing to buy another home in the future. Foreclosures just don’t happen, usually there is a reason a person can’t continue to make payments on their home. It can be due to illness, job loss, and unexpected accidents; there’s a whole list of reasons, and lenders will take circumstances into account – to a degree. Usually two to three years after a foreclosure, and successfully rebuilding your credit, you can get back into the real estate market. This means you will get competitive rates with the appropriate down payment and income.

    Foreclosure is a financial tool for people who have financial difficulties, and this happens to millions of people. So, think of it as an opportunity to start over, and don’t beat yourself up to badly because there is life after foreclosure.

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