Foreclosure isn’t the end of homeownership

This was originally published on Monday, October 21, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

If your home was foreclosed upon, you are probably feeling that there is no hope to ever own a home again.

That is far from the truth.

Although a foreclosure appears on your credit report for seven years after the date of foreclosure, you may be able own a home in the future. The most important step is to rebuild your credit. Paying your bills on time is the best way to repair your credit.

There are some other things to consider after your home has been foreclosed:

• Where to live. Although not prevalent on Guam, many landlords look at a potential renter’s credit score. It can become difficult with a recent foreclosure on your record. You may be asked to pay a higher security deposit.

Once foreclosure becomes inevitable, start looking for a place to stay. If you were eligible and applied for a loan modification through the government Home Affordable Modification Program (HAMP) but you were denied, you may qualify for the Home Affordable Foreclosure Alternatives (HAFA) program. You may also ask your financial institution if there is a grace period before you must vacate your home.

• Collections and higher interest rates. Some credit cards have a default rate in which interest rates can increase. Other creditors may also feel that the foreclosure means that you are defaulting on other debts and try to contact you for collection of payment.

• Buying another home. The two large lending institutions Fannie Mae and Freddie Mac usually require two to five years before a defaulted borrower can apply for another mortgage. The Federal Housing Administration (FHA) requires three years after the foreclosure to be eligible for financing.

• Employers. You may have to explain to your employer your recent foreclosure, especially if you require a security clearance. You may also have to disclose your foreclosure to prospective employers. Being honest and forthcoming will show that you are trustworthy.

• Taxes. Unfortunately, there may be some taxes that are associated with the foreclosure as well.

It is difficult to overcome the stigma, emotional toll and financial consequences of a foreclosure. It takes time to rebuild, but with diligence and hard work you can recover. Talk to a financial counselor to see if there is any way to help repair your score.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.comand read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

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