Foreclosures affect mortgage holders and their future housing situations because they negatively impact credit scores. In fact, for individuals with high credit scores, a home foreclosure can deduct up to 100 points from their grade. Typically, those foreclosed upon will look for a rental before they apply for another home loan because they are unable to qualify for financing for at least another year. But since foreclosures impact credit scores, finding a good apartment with less than exemplary credit is tricky.
To navigate today’s competitive rental market with a foreclosure on your credit history, use the following tips.
Start your search fast
Foreclosures don’t appear on credit reports right away – the process takes time. If possible, search for an apartment and lock down your lease before the foreclosure is finalized. While your previous missed payments leading up to the actual foreclosure will likely be processed and reported to the credit bureaus, these won’t have as large of an impact as the foreclosure itself, and will only be reported when you have been in default for more than 30 days. Even so, prepare some explanation for when a landlord asks about missed payments upon reviewing your financial history.
Provide a hefty deposit
Your landlord might be willing to overlook your less than satisfactory financial history if he or she is given a heftier deposit. The up-front lump sum proves you have the ability to pay monthly rent and gives them a safety net in case you do fall into financial trouble again in the future. Overall, larger down payments give landlords peace of mind.
Search for a private landlord
Privately-owned apartments and in-law units owned by single-family homeowners sometimes don’t require credit checks. While this is not something you want to ask up front, as it is a red flag to the landlord, searching for these property types maximizes your selection of rental homes and betters your odds of being selected. Try searching for condos for rent, as well. Finding an agent who has access to private listings is typically the easiest way to searching for and scheduling showings with single-family homeowners renting out their spaces.
Minimize your additional debts
Keeping your other finances in check after the foreclosure helps your credit bounce back sooner. Plus, having a balanced and manageable financial portfolio will help you better cope with your recent asset loss and start fresh – totally debt free.
Ask a friend to cosign
If you’re having trouble getting approved, ask a friend or family member to put his or her name alongside yours on rental applications. Cosigners assume responsibility for monthly payments should you fail to pay rent, which helps landlords feel safeguarded when leasing to those with past financial defaults on their reports. If you are enlisting a cosigner, be extra cautious with budgeting for your rental. If you were to ever fall short on rent, your friend or family member would be responsible, and you would end up owing that person money in the end.
Finding an apartment or private rental after foreclosure shouldn’t be a hassle, and likely won’t when the proper due diligence is applied.