How to Start Recovering When the Bank has Foreclosed on Your Home

It is without a doubt one of the most damaging, depressing, and difficult times in a person’s life when they have to foreclose on a home. Most families dream of having their own space, where they can control the color and design choices of their house, how loud they are, and simply experience the joy that comes from owning the very space where you spend most of your family time together. For many families though, these dreams quickly crumble into a nightmare, where mounting debt, missed payments, and a constant barrage of calls from creditors and lenders can leave families terrified when the phone rings.

What can sting even more than the loss of a family’s home is the fact that, often, it wasn’t really your fault, but there was still nothing you could do about it. Maybe you had an emergency surgery that led to thousands in medical debt, or your company suddenly went into bankruptcy, and you were laid off. Both are common, and can happen to anyone. There’s nothing easy about having to foreclose on your home, and it’s a shame when it happens, regardless of the circumstances.

If you’re one of those people who have lost their home, whether you were to blame or not, you’re certainly not alone. More than 600,000 properties entered foreclosure proceedings in the U.S. in 2017. It can happen to anyone.

Despite that, foreclosure doesn’t signal the end of your life or your dreams of home ownership, no matter how it may feel at the time. I’m not going to lie to you and say you have an easy road ahead, but the first critical step you have to take is to decide that this won’t be the end for you and your family. Once you have that attitude, you’ll be ready to start walking on the road to recovery, and the following are some steps to help you get there.

Start Rentingsaving

Once you’ve adjusted to having your own home, where you were essentially the master of your own domain, and could do nearly anything you wanted on your own property, it can be hard to give up that freedom. Nevertheless, if you’ve recently foreclosed, you need to let go of the idea of owning a home for awhile, and focus instead on finding a rental property that you can afford, while providing the space you and your family will need.

There’s nothing fun or easy about this; rental properties come and go on the market just as fast as homes for sale, and they’re not cheap. You’ll probably have to pay a security deposit, application fees, the first month’s rent, plus any miscellaneous fees the renter requires. In addition, a foreclosure is going to flat out beat your credit score into the ground, causing you to drop anywhere from 200 to 300 points on average. That can make it extremely difficult to find a renter who’s willing to work with you.

Regardless, as difficult as finding a place to rent will probably be, it will still be much easier than trying to find find another house to buy, and quite frankly, you most likely will not qualify for a mortgage for at least several years. Take advantage of this time to let your landlord worry about repair costs, consolidating utilities, and replacing any broken appliances; you worry about saving money and getting your credit score back up.

Change Your Spending Habits

Regardless of the events that led to the foreclosure, you and your family are in for some tough times financially. While you no longer have to worry about a mortgage or homeowner’s insurance, now you’ll have to find a new place to live, potentially make security deposits for a new property, and start saving money to dig yourself out of the hole of foreclosure.

If you have any luxuries that you’ve enjoyed, but you don’t absolutely need, now is the time to eliminate them from your budget. Whether that means eating out less, carpooling for school and/or work, or whatever you have to do, set some money aside. With your credit score most likely in shambles, many venues that were available to you to get money will now be closed off, so you will have to hunker down, build up your reserves, and adjust to the new lifestyle you are faced with.

Take Out a Loan

It may sound crazy suggesting that you make an additional financial commitment, when debt was most likely what drove the bank to foreclose on your home in the first place. I understand completely, but in reality, a loan could be just the thing you need to start getting your finances back to a healthy position.

One of the biggest factors that drives people into debt is trying to juggle too many accounts from too many agencies. It can be very challenging to keep up with the premiums, minimum payments, deadlines, and fees across multiple accounts. By taking out a loan, you can consolidate your debts into one location, and give yourself one definitivie payment that you have to worry about each month, instead of many. It will also introduce some stability and predictability back into your life, and you’ll very much need both in the near future, both from a practical standpoint, and to maintain your mental health.

Taking out a personal loan to consolidate your post-foreclosure debts is also beneficial because it can help your credit score recover faster. Since credit history and credit diversity are two of the factors used to calculate a credit score, having a single loan that you pay on time, every time, through the life cycle of a loan, will go a long way towards restoring creditors’ faith in you.

And, as a final, simple note, you’re going to need money. You may have a decent job, and an otherwise spotless credit history, but foreclosure can throw all of that into disarray. With your finances in an already tumultuous state, being prepared for other emergencies, like a surgery or car crash, are going to be critical. It’s something that no one wants to dwell on, I know I certainly don’t, but it’s something that must be done.