When foreclosure happens, it can deliver a devastating blow to your morale as well as your credit.  Your home has been taken from you due to financial crisis in your life, and you might feel that there's no hope of recovery.  The good news is you can repair your credit after foreclosure and even possibly buy another home in the not-so-distant future.  Follow these steps to overcome foreclosure and reach for new goals.

Make Credit Repair a Priority

Although a foreclosure will show on your credit report for seven years, this doesn't mean you can't repair your credit and improve your credit score while waiting.  You can begin immediately by paying faithfully on all remaining debts, including monthly expenses that are not exactly loans (rent, utilities, etc.).  As you pay all bills on time each month, your credit can begin to slowly recover.  "Slowly recover" means it may take a couple of years to start seeing the benefits on your actual credit report.

If you're planning to buy another home, it's best to wait a while and allow your credit to regain momentum after the foreclosure.  Your goal should be to fix all negative marks on your credit, thus leaving the foreclosure as the only negative thing showing on your report.  If you try to rush out and get a new mortgage immediately after foreclosure, be prepared to pay very high interest rates or to be declined by many lenders.  If you wait a while and repair your credit first, then your interest rates will be more favorable.  Consider the long-term benefits of a 30-year, low-interest mortgage!

You can obtain a free copy of your credit history from the three major reporting bureaus once per year.  This enables you to see what the creditors see.  If you wish to request your credit report online, there's only one website that's authorized by the federal government to provide the reports:  www.AnnualCreditReport.com

Down Payment

When applying for a mortgage after a foreclosure, you'll likely be required to put a substantial amount down.  It's best to save 15 to 20 percent down plus extra for closing costs.  This along with your efforts to repair your credit will show the bank that you are serious about buying a home.

Check Payments and Other Costs

Before shopping for a new home, decide how much house you can afford based on your budget.  Use free online mortgage calculators to figure payments based on the going interest rate.  Speak with several lenders to see what interest rate you would qualify for based on your credit and down payment.  A mortgage calculator will reveal the actual payments based on the number of years financed, amount financed and interest rate.  Be sure to exclude your down payment from the amount financed when entering your information.

When figuring payments, don't forget to include other costs such as property taxes, homeowner's insurance and PMI (private mortgage insurance).  PMI is usually tacked on to payments if you are financing more than 80 percent of the appraised value.  If you have 20 percent down or can by a home well below the appraised value, you might not have to worry about PMI.

Keep in mind that lenders will likely be more skeptical about granting you a mortgage if you've had a foreclosure.  That's why you should take time to repair your credit as much as possible and save a large down payment.  Lenders will want to know that you've overcome your financial woes and learned from past mistakes.  Use these tips to start rebuilding your credit after foreclosure today!