What is Life Like after a Foreclosure?

With so many foreclosed homes and properties on the market today, one has to wonder what these homeowners have to go through after they go through a foreclosure. Life can’t be easy for them and the psychological stigma of a foreclosure probably has some negative effects on a person. But the financial effects can be even worse. What can one expect after they have made it through the foreclosure process?

A New Place to Live
In some cases, the immediate problem following a foreclosure is trying to find somewhere to live. Of course, in some cases of foreclosure, the homeowner has already considered this option and made arrangements. This is especially true these days since it usually takes the bank a long time to foreclose on a property – as long as two years. If you think you are going to get foreclosed on, start saving up a rental deposit or some other savings so you can find a new place to live soon after your foreclosure.

Dealing with the Credit Damage
There is no doubt that a foreclosure on your credit history is going to make things difficult for you in the foreseeable future. If you backed out on paying on your mortgage, why would another lender take a chance on you? And why would other creditors offer you a line of credit either? Even if you already have credit cards, your interest rates could skyrocket as a result of the foreclosure. Your credit score may never be the same if you go through a foreclosure.

Problems with the Job Hunt
Many foreclosures occur because a person in the household has lost their job. And since most employers do credit checks on potential employees, that foreclosure could be an obstacle to getting a new job. In actuality, your foreclosure should not be a topic of discussion in the interview unless the job you are applying for involves you handling money. In cases like this, you should be ready to explain the reason for the foreclosure. You could also explain how the foreclosure has made you change the way you handle money and how it has improved your budgeting skills.

Paying the Tax Bill
When you go through a foreclosure, you are essentially being forgiven of the money that you borrowed from a mortgage lender. In most cases, the IRS considers this income for you. You may be at the lowest spot in your life just a few months after your foreclosure and then you might get a bill from the IRS for the taxes you owe on that “income.” There are ways around this so check with a trusted tax advisor before paying that tax bill.

These are just a few of the financial hurdles a person needs to jump over after going through a foreclosure. With some determination and hard work, coming through a foreclosure can be a great learning experience that can motivate you to prevent it from ever happening again.