One of the toughest -- and certainly most pressing -- aspects of foreclosure is figuring out where to live after you're forced out of your home. Although you're unlikely to be in a position to buy another house for at least a couple of years, careful planning and preparation can help you find a rental to call home while you work on improving your finances.
Exhaust Other Options
Unless you've received a notice to vacate your home, there's a chance you can stop the foreclosure. Loan modification, which makes your payments more affordable, is one way to do so, and your lender or a housing counselor can help you apply. If you don't qualify for a modification but you're determined to stay in your home, contact an attorney to find out if bankruptcy is an option. Another possibility, particularly if your financial hardship has passed, is to ask your lender if loan reinstatement is still possible. If so, a loan from your family, 401(k) or other resources might bring you current.
As soon as you determine that foreclosure is unavoidable, put all the money you normally would pay toward your mortgage into a savings account. Many landlords rent to tenants who’ve lost their homes to foreclosure if the tenants demonstrate responsible spending. Save at least your target rental expenses each month to prove to landlords that you can afford your rent payments and utilities. Set aside moving money, first and last months' rent plus a security deposit equal to one month's rent. If you can swing it, saving an additional few months' rent to pay in advance makes you less risky in a landlords' eyes. Some lenders offer cash-for-keys programs to help with foreclosure moving costs, paying a few hundred to a few thousand dollars to homeowners who vacate voluntarily and leave their homes in good condition.
Homeowners facing foreclosure often fall behind in other payments as well. If you haven't yet received a 90-day notice that your home will be sold, you may have time to catch up on some of those payments and pay down your debt. Current accounts help prospective landlords see your foreclosure as an anomaly.
Be realistic when shopping for a rental home. An affordable rent usually costs one-third or less of your gross income. Renting within your means is further proof to landlords that you manage your finances responsibly. Strengthen your application with a letter that briefly explains the circumstances of your foreclosure and the steps you've taken to get back on your feet. Although you can submit a statement with any application, it's most likely to work in your favor with a private landlord. Corporate property managers, such as those that manage apartment complexes, have less flexibility. A face-to-face interview with the landlord also may be helpful.
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