At present, the economy is improving and the rate of foreclosures are decreasing.

Compared to before, completed foreclosures in January were 21.7 percent less.

But that doesn’t mean it doesn’t happen anymore.

Foreclosure is still a very realistic problem.

Especially if you live in states such as Florida, Michigan, Texas, California or Ohio.        

There are many steps in the foreclosure process.

If you are in step one, you’ll need to know what to do.

If you’ve lost your home already, it’s reassuring to know you can receive help.

To make things easier for you, here are some explanations.

You can also find tips on recovering from the blow.

What Exactly Is Foreclosure?

Simply put, it is when you cannot pay for the home anymore.

You, the homeowner, defaults on the mortgage.

If you cannot pay the outstanding debt or sell the home through a short sale, the property will be taken.

Your home may be put through an auction.

The bank might buy it back as well.

At this point, the property is bank-owned, or real estate owned (REO).

You May Still Owe Money

When your house is sold during the process, the price is most likely less than what you owe.

This difference is known as the “deficiency.”

Your lender can demand you to pay the deficiency.

But that depends on the state.

And because most who go through foreclosure don’t have much income, many lenders forgive the deficiency.

But Then There Are Taxes

So your lender canceled your debt.

You no longer owe him thousands of dollars.

But to the IRS, it means you’ve received that amount.

Therefore, you now have more taxable income.

It doesn’t seem fair, but it’s just how things go.

Thankfully, there are two exceptions.

If you qualify for the insolvency exception or the Mortgage Debt Relief Act of 2007, you won’t have to pay the taxes.

To know if you are eligible, read more about it here.

Moving On: Finding A New Home

Before, there was a seven year waiting period after foreclosure or bankruptcy before you could buy another home.

It’s much shorter now.

The standard wait is now three years to receive a Federal Housing Administration (FHA) loan.

For exceptional circumstances, it can even be only one year.

Be Careful Of Predatory Lenders

You might be desperate to find a home, but please choose carefully!

If a lender or real estate agent gives you an offer too good to be true, it’s probably not true.

Make sure to read the contract and ask questions.

Even better, ask for help from a housing counselor to find the right places.

They can even assist you with credit problems and budget plans.

You can find government-approved counselors here.

Get Your Explanation Ready

With a foreclosure in your history, you’ll need an explanation in your pocket.

Many employers do credit checks as well.

If you need to find a new job, be ready to explain to your interviewer.

You can try describing how the foreclosure helped you improve your budgeting and saving skills.

Build Up That Credit Score!

The foreclosure is a huge blow to your credit score.

With a bad rating, it’ll be hard to get even a car loan.

And, as mentioned above, it’s also important for job hunting.
The minimum credit score required by the FHA for maximum financing is 580.

Some lenders and landlords will take that minimum.

Others might require a FICO score of at least 640.

Payment history and the amount owed make up more than half of your FICO credit score.
You can improve your score by paying off debt on time. Don’t make unnecessary loans or overuse your credit card.

It’ll be a plus if your utility providers and landlords can report your prompt payments to major credit bureaus as well.

Save For Rainy Days

Good spending and saving habits are easier said than done.

But once you get started, the effects can go a long way.

Take Care Of Physical And Mental Health

Most homeowners who default on their mortgage are in their mid-30’s to mid-50’s.

Going through the loss of your home at this time is definitely stressful.

It can affect your career, your family, and social circle.

Without a doubt, it will put an emotional toll on you.

If you have children, it is also important to explain to them what happened.

Explain that they will move to a new place.

They might also have to change schools. I

t’s easier to accept the fact if you warn them beforehand.

A poor mental health can lead to poor physical health.

This includes headaches and high blood pressure.

Exercising and taking breaks can be very beneficial to reducing stress.

So don’t be afraid to reach out.

Talk to your close friends and family about your problems.

If needed, find a counselor or professional for your health.

There are multitudes of helpful articles online too.

The foreclosure process is tough and full of challenges.

But don’t worry.

You’ll be able to get through it all.