In this current housing and economic recession, many current homeowners are losing their properties due to defaulting on their mortgages. But unfortunately, if you find yourself in this situation, your troubles may not end with losing your home. One of the big obstacles you'll likely have to deal with is when you look for a place to rent. Finding a landlord who will rent to you may be a challenge because of your damaged credit from the default. But don't despair – luckily, there are several ways you can help yourself to lessen the pain of the situation.
First and foremost, if you are defaulting on your mortgage, that doesn’t mean you should default on all your other bills too. Some people in the process of foreclosure just stop paying their cell phone, CATV, utility bills, etc., which only makes their credit worse and ends up damaging credit more than if they solely defaulted on their mortgages. Avoid doing this to yourself. In fact, if you simply did a short sale, it really does not do that much damage to an existing good credit score and should hardly impact your ability to rent another residence. But if you default on many accounts, it will probably significantly drop your credit score and make renting much more difficult.
Note: If your situation is so precarious that you are contemplating bankruptcy, you need to consult with an attorney to discuss paying or not paying your bills and all the related matters.
It's also advisable to go to a non-profit credit counseling agency and get some advice on how to reduce the cost of credit and negotiate with lenders and credit card companies. There, you may be able to settle some debts for less, lower your interest rates, or lower your monthly payments so as to help you get back on your feet. You should be able to find information about trustworthy counseling agencies from your local government or the National Foundation for Credit Counseling.
On the other hand, if your credit is already significantly damaged due to a housing issue and now you're trying to rent a place to live, the best way to handle the situation is to be upfront and straightforward with a new prospective landlord. Explaining the situation early on should help gain a trust with the person making the rental decision. Not being truthful by not mentioning the issue in person or on the rental application is not a good idea. The landlord will most likely find out when they run a credit report, and then it would become an issue of whether or not the landlord feels they can trust you, which will probably end your chance to rent that unit.
But if you are losing your home, however are still fortunate enough to have consistent employment income, you should have few issues renting a place to live. Your application should also list great references, any savings, and any mitigating factors that caused the housing issue. Mitigating factors could be loss of prior job, medical bills, or any other items related to the short sale or foreclosure.
Luckily, for the people in these unfortunate situations, they have plenty of company these days with other people who are in financial trouble. Due to this economic issue, landlords have been much more accepting of people with damaged credit due to housing if those people have solid credit, jobs or payment histories otherwise. Therefore, if you are losing your home, don’t throw in the towel on the rest of your bills and responsibilities. Keep your credit as good as possible and that should go a long way towards helping you find a place to live and restart your creditworthiness.