8 Tips To Help You Rent After Foreclosure

If you’ve recently experienced foreclosure and are facing eviction, you’re probably preoccupied with finding a new place to live. In most cases, you will have to rent your new place instead of buying it. But many rental applications include a credit check, which can be worrisome if you have a foreclosure on your credit report. Foreclosures damage your credit score, so you may find many landlords have concerns about taking you on as a new tenant. But it won’t be impossible to find a rental. Here are eight tips to help you find a place to rent after your foreclosure has been settled. 

1. Rent Your New Place Before the Foreclosure Shows on Your Credit Report

This may be your best option if you can find a new place to live quickly. Depending on state law for the foreclosure timeline in your state, it may take a while for your foreclosure to show up on your credit report after the foreclosure sale. If you can get your prospective landlord to run your credit check before it shows up, then you may be able to get approved with no problem. Getting into a new place before that happens is probably the easiest solution to your dilemma. 

2. Keep Your Other Credit Accounts in Good Standing

It’s important to stay current on all of your other payments, such as your credit cards, student loans, and other monthly debt obligations. Don’t let your credit score go down the drain because of your foreclosure. It will be much easier to find a place to rent if you can show the landlord that you have kept up with your other payments. 

Many landlords are at least somewhat understanding if you can show them that you had a valid reason for falling behind on your house payments. For example, if your mortgage payment went up because you had an adjustable-rate loan that increased and made your payments unaffordable. But if you don’t have a valid reason and have fallen behind with other payments as well, that could be more difficult to explain. 

3. Be Prepared for the Tenant Screening Process

The tenant screening process usually includes income verification, a criminal background check, a credit check, and a look at eviction records. To prepare for this, gather documents that will help verify your income, such as your W-2s or 1099s. If you have a copy of a recent credit report, offer it to your prospective landlord so they won’t have to run a hard credit check. It may also be helpful if you can get a statement showing you made your mortgage payments on time until the event happened that caused your foreclosure. 

Most landlords will also run a criminal background check on prospective tenants, so be prepared to explain any items on this report. Landlords will be less concerned with something like a speeding ticket and more concerned with a felony charge or a history of repeated criminal behavior. It can work in your favor to disclose anything of concern on your record to prospective landlords, and let them know how you’ve addressed it moving forward. 

4. Be Honest About the Foreclosure if It’s on Your Credit Report

If you aren’t able to find a new place to live before your foreclosure shows up on your credit history, be honest about it when you apply for a new residence. Lying on your rental application will result in immediate rejection by most landlords. But you are under no obligation to mention the foreclosure if it hasn’t shown up on your credit report yet. You can check your credit report right before you apply with the landlord to see if the foreclosure has been reported or not. If it has, tell your landlord about it. A foreclosure isn’t necessarily disqualifying and being upfront with the landlord about it shows you take responsibility for your actions. 

If the landlord asks you questions about your foreclosure, be honest about what happened, why it happened, and what you are doing to rebuild your credit score. As mentioned, many landlords will be understanding if the foreclosure happened due to circumstances beyond your control, such as being laid off from your job or becoming disabled. 

5. Make Sure Your Income Matches the Property You Want To Rent

Any prospective landlord will want to know your monthly income before they approve your application. They want to see that you make enough money to comfortably pay the rent each month plus your other expenses. Remember your credit report will give them a sense of what your debt obligations are.

As a general rule of thumb, your gross monthly income — the amount you make before taxes and other deductions are taken out — should be at least three times your rent payment. So if you make $3,000 a month, then your rent should be no more than $1,000, unless the rent also includes one or more utilities. Renters whose income to rent ratio is lower than 3:1, aren’t likely to qualify financially for the rental even if the landlord is willing to overlook a foreclosure.  

It is also important to remain flexible. If you don’t qualify for one unit, ask the landlord if they have cheaper options available. Finding an affordable rental can help you to save money and get back on your feet sooner. 

6. Offer a Higher Security Deposit

If you’re willing and able to pay a higher security deposit than the landlord is asking, offering to do so shows you’re serious about the property and paying your rent. Just don’t offer more than you can afford. A higher security deposit reduces the landlord’s risk if you become unable to pay rent. It also allows them to cover any losses that they might incur if you are forced to break the lease for any reason. Money can be persuasive. 

7. Use a Cosigner if Necessary

If you have a friend or family member who is willing to cosign the rental agreement with you, this can help improve your chances of being approved. A cosigner decreases the landlord’s risk. If you break your lease, they’ll have another source of funds to draw from. Of course, you need to assure your cosigner that you will be able to pay your rent without fail each month and will never need their financial assistance. You should also be able to pay for any damage to the rental unit when you move out so that your cosigner is not on the hook for that either. 

8. Look for “No Credit Check” Rental Units

When searching for a new place to live, look at smaller apartment complexes, rental properties, duplexes, condos, or single-family residences. Any rental owned and managed by a single landlord instead of a property management company is more likely to be flexible in its rental terms. They may also screen candidates less thoroughly.

Most large, well-established apartment complexes are run by rental companies that have strict standards for screening prospective tenants. A bad mark on your credit report or a criminal record may disqualify you immediately. So give yourself a leg up by looking at other places. 

You can also ask family or friends if they know of anyone looking for tenants. A personal recommendation can go far. And don’t overlook alternative living arrangements, such as a family looking to rent out their finished basement. The internet is another excellent place to search for living quarters. You may be able to get a list of landlords or properties that don’t require a credit check. Just be prepared to pay slightly more in rent than you might otherwise.

If the Home You’re Renting From a Landlord Is in the Foreclosure Process…

If you are a tenant in a property that is going through the foreclosure process, there are federal, state, and local laws that protect your tenant rights. The Protecting Tenants at Foreclosure Act (PTFA) provides federal protections for tenants across the U.S. Under the PTFA, existing tenants can remain in a foreclosed property until their lease term ends or 90 days after the new owner/landlord gets the title, whichever is longer. There must be a bona fide change of ownership in the property or a court order for eviction for this to apply. In other words, the new homeowner has to take possession of the property before the current tenant can eventually be evicted. 

Tenants must get a 90-day notice before they can be evicted, and this applies in both judicial and nonjudicial foreclosures. That is foreclosures that go through the court system and those that don’t. This must be a written notice — a verbal notice does not suffice. If your landlord doesn’t follow this requirement, they aren’t following the law and you may be evicted prematurely. If you think this has happened to you, you can seek free or low-cost legal services from a legal aid organization.

If you’re concerned about the property you’re renting being foreclosed on, you can check the county recorder of deeds office. This is sometimes called the recorder of deeds or recorder’s office. Foreclosures are public information, so if there is anything to find, you should have no trouble finding it. 

Let’s Summarize...

If you’ve recently faced a foreclosure, you may be worried about finding a new place to live. This can be a challenge, but it’s not impossible. When applying for a rental, be honest and upfront with a prospective new landlord if your foreclosure is showing on your credit report. Take responsibility and let the landlord know what happened and how you’re handling your finances now to cover your monthly bills. Make sure you have enough income to pay the rent on the property you’re applying for.

Also, though your credit score will take a hit with the foreclosure, you can help rebuild it by staying current with all your other payments. A prospective landlord may look at both your credit score and history. Having a history of timely payments can help offset their concerns about a foreclosure due to unforeseen circumstances.  

If you’re a tenant and your landlord is facing foreclosure, remember there are federal laws that protect you.