There’s no denying that foreclosure is a devastating process to go through, both financially and emotionally. Many times, families lose hope in their ability to ever successfully achieve homeownership again.
At NeighborWorks Orange County, we are here to tell you that homeownership is possible after a foreclosure.
It won’t be an easy journey. It will take time. From a credit standpoint, foreclosure is the most damaging way to get rid of a property. But you can overcome this challenge and become a homeowner again. Here’s how:
Immediate Action Items
The first step will be to finalize the foreclosure. Once you remove the monthly mortgage hit from your credit report, your credit can start the healing process.
Then you need to assess your situation. We recommend sitting down with one of our counselors for help. The most important goal at this time is to understand what factors led to the foreclosure. Many of our clients face challenges such as a job loss, reduced hours at work, death, or a disability that contributed to the foreclosure. A counselor can help you pinpoint the factors specific to your situation.
More importantly, a counselor can help you create a roadmap to recovery.
All of our work is completed individually. We will never give you a cookie-cutter answer. Consider us part of your team.
Our counselors start with a financial snapshot of your current situation:
- What other debt do you have?
- Was bankruptcy part of the foreclosure?
- What is your monthly income?
- What components are straining your budget?
They will work with you to establish a budget. This is essential to financial recovery. They will help you analyze the areas of your budget that are tight, as well as areas where you have a little flexibility. The goal is to be realistic about what you can and cannot afford.
Lastly, our financial experts work with you to identify your goals. Five to seven years down the road, where do you hope to be? Is homeownership part of that goal? Depending on your specific goals, we help to put together steps to achieve them. These also include reasonable timeframes and milestones to achieve along the way.
Once you start your journey toward becoming financially fit, you can start to address your credit. Our counselors can help you approach your damaged credit. Starting out, you will work on three main aspects:
- Settling bad debt.
- Removing mistakes on your credit report
- Getting current and paying off areas of your debt.
It’s essential in repairing your credit that you have no late payments moving forward.
It Takes Time
Know that it takes time to repair your credit. This will not be an overnight process. In fact, most times it will take years. The more time you can put between yourself and the foreclosure, the better it will be—emotionally and for repairing your credit.
While each program has different requirements, the majority of the time it will be seven years before you can purchase a home.
This gives you time to recover.
As you work through this journey, we recommend working to achieve a minimum of 640 credit score. You will need three lines of credit in good standing that have been open for two years when you apply for a new mortgage. Additionally, you need to have some form of down payment. When you work with our counselors, they can help you find different down payment assistance programs that match your down payment.
We are here to help throughout the entire journey. You may be starting this journey today. You may be several years in. You may even have worked with our counselors before and became discouraged. Whatever your current circumstances, we invite you to sit down with them today.
Together we can help you on the path to achieving your goals today.