Foreclosure, Your Credit & Buying Again

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Foreclosure is a devastating process, but it doesn’t mean that you can never own again. If your goal is to return to homeownership, know it is possible. It takes commitment and an action plan to improve your credit score, heal from the recovery, and build up strong financial habits, but the reward is worth the effort.

At NeighborWorks Orange County, we are here to help you realize your housing goals. Not everyone who comes out of a foreclosure desires to own again. That’s okay. We can help you through the process of foreclosure and work to put it behind you. Other families want to work to achieve purchasing a home again. We work with those individuals on a long-term plan to become ready to purchase a home. 

If you are facing a foreclosure, here are four steps to moving forward.

 

Finalize the Foreclosure

The most important step is for families to finalize the foreclosure. Each month that passes adds another harmful ding to your credit score. Some families or individuals look for ways to extend the process or even inhibit the lender from being able to move forward with the proceedings. This includes actions such as clouding the title or filing for bankruptcy.

While these may give families more time to determine their next move, long term they create additional challenges for a family looking to own again.

The goal should be to get out of the situation with the least amount of damage possible. Working with a foreclosure counselor can help to outline steps to try and limit the damage of the impending foreclosure. They can also suggest different programs or resources to help your family in the intermediate.

 

Recovery, Healing, and Adjustments

An important step in the recovery process is determining which factors led to the foreclosure. Situations that can lead to this include death in the family, losing a job, a financial hardship, or purchasing too much home to begin with. Before charting out a path to return to homeownership, first families need to have a very serious evaluation of the series of events that led them to a foreclosure.

Once digging into the causes, families need to adjust to the new circumstances and put measures in place try to prevent a similar situation in the future. While not all circumstances can be prevented, there are measures to try and limit the impact. This can include strong financial health and increased savings.

Adjusting to a new living situation and life after foreclosure will be a process. It’s important to surround yourself with a support network and organizations designed to help you. If you are unsure of where to start, connect with one of our counselors today. They can help you locate services, nonprofits, and other programs to help facilitate your recovery.

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Reestablishing Credit

A foreclosure is one of the worst things an individual can do to their credit. Fortunately, it only stays on the credit report for seven years. Once they are able, anyone who has gone through a foreclosure needs to work on ways to rebuild credit.

At first, the options will be limited. Banks and other traditional lenders will not be inclined to loan to you. Check with your bank about getting a secured card to start building trust again. Here you put money into an account and then cannot spend more than the initial amount. Since it is very similar to a pre-paid card and there is very little risk for the bank, it allows even a high-risk borrower to utilize it.

Once you are able to add other lines of credit, it’s good to have about three credit cards or lines of credit in good standing. It’s imperative that you always pay on time. A single late payment will make a much bigger impact on your credit now as compared to before the foreclosure. Start small and only use lines of credit you can pay back on time.

Also, be mindful of paying utilities and rent on time.

 

Purchasing Again

After the seven-year mark, and with a pristine recent payment period, you can purchase again. In order to do so, you will need to work with an HUD-approved housing counselor. They work with you to ensure you are purchasing a good size home for your financial situation, that you understand all the components of homeownership, and are prepared for the responsibilities.

At NeighborWorks Orange County, we have a team of HUD certificated counselors at the ready to help you. It doesn’t matter if you are just starting the foreclosure process or are past the seven-year mark. We walk with you throughout the entire process. Our team is skilled at meeting individuals and families wherever they are on the journey to homeownership. From there we help to chart ways to move forward.

 

Connect with one of our counselors today to put you and your family on the road to homeownership again.

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