Basic Steps to Finding a Rental Property After Foreclosure
Wondering where you’ll live once the bank forecloses on your property? Going through foreclosure is already stressful enough. However, finding out that it can drop your credit score by 100 points or more and leave a red flag on your credit history for several years is enough to leave anyone concerned. Though obtaining a home loan isn’t an option right away, you can find a home or apartment for rent.
Finding a place to rent is much like the home buying process. You’ll need to have an otherwise decent credit history, proof of employment, and enough income to cover rent, utilities, and other expenses. As you’ve just gone through foreclosure, there are some things you’re going to want to do to increase your chances of being approved and put the landlord’s mind at ease. Here are some steps to follow:
1. Evaluate Your Finances
There are plenty of reasons that people go through foreclosure – loss of income, financial distress, and so on. However, to ensure that you don’t damage your rental history, the first thing you should do is evaluate your finances to determine what you can comfortably afford. Some expenses to include would be:
- Rent – It is recommended that you spend no more than 25% of your income on housing. This percentage can give you a roundabout number of what price range you can afford in rent.
- Insurance – Though the landlord has property insurance in place, this does not protect your personal belongings. You’ll need to obtain a renters insurance policy to ensure you’re covered in the event of an emergency.
- Utilities – gas, electric, heat, water, and cable
- Personal expenses – this would include things like outstanding debt, groceries, medical expenses, entertainment, and so forth.
2. Check Your Credit Score
You’ll need to have a reasonable credit score in order to obtain a rental property. The good news, however, is that landlords tend to have looser requirements than lending institutions. Review your score to ensure that there is no way you can improve it prior to searching for a home. The better the rest of your credit history looks the easier it will be to secure a place to rent.
3. Seek Properties for Rent by an Individual
There are lots of options when looking for a place to rent. Once you’ve gone over your finances you’ll have a clear idea of what you can afford. Though you can try your hand at apartment complexes or homes that are offered by property management firms, you may have a better shot at getting into a property that is for rent by one individual – a homeowner. An individual may be more inclined to consider your circumstances whereas larger companies have stricter credit requirements that may make it hard for you to be approved.
4. Be Prepared to Explain
When you’ve located a property that you’re interested in, it can’t hurt to explain your circumstances to the landlord. This is especially true for anyone who was dealing with unexpected circumstances such as a loss in income, loss of a loved one, or an unexpected illness. Talking this over with the landlord might put any suspicions they had to rest.
5. Offer a Higher Deposit
When renting a property you’ll be required to give a security deposit. Some landlords request a total of one month’s rent. However, if your credit history is not the best, it may be beneficial to offer to provide a higher deposit. For instance, instead of giving them first month’s rent, you could provide them with two or three months’ worth as a sign of good faith. Be sure to get it in writing if the landlord agrees to this as you’ll want to get your deposit back should you relocate.
6. Show You Can Afford it
Another method that can help you secure a place to rent is showing that you can afford the rent. By showing the landlord your pay stubs, they can see how much you’re bringing in each pay period. Again, you’ll want to make sure that you haven’t chosen a rental property that consumes a large chunk of your income or this may deter the landlord from offering you a lease.
7. Consider a Co-Signer
In some cases you may just need a friend or family member to assist you. If your rental application is denied for credit reasons, try applying with a cosigner. This doesn’t mean that they have to live with you, it simply provides “back up” on the chance that your credit wasn’t enough to meet the requirements. You’ll want to make sure that they have decent credit. Also, explain the responsibilities of a cosigner so that there are no issues later on.
Dealing with foreclosure is tough. As you begin looking for a new place to stay, rental properties are always a good option. They can provide you with a reasonable amount of space at an affordable rate until you’re able to get back on your feet again. Each of the steps above will help you in minimizing the insecurities a potential landlord might have so that you can secure a lease. Follow each step accordingly, and with time you should find a place to call home.