The 55-year-old Celebrity Big Brother contestant, who famously entered the house with Jade in 2007, conceived the child in Tenerife in July with her boyfriend of one month John Hickinbottom.
However, she later suffered from cramps and bleeding while at home in Bermondsey and called out an emergency GP. She was taken to London's St Thomas' Hospital where it was confirmed the baby had died.
"I thought God was giving me one last chance to bring up a child," Budden told The People. "I thought Jade was bringing me a little girl from up there. It was like she was helping me from Heaven. I've lost Jade and I've lost contact with my son Brett so I was over the moon that I had another chance.
"Now I'm so upset. I'm grieving again. The baby would never have replaced Jade but it would have given me something to love, like I love her. This time I would have been a proper mum. The moment I realised the baby had died, I broke down in tears.
"It was so painful, both physically and mentally. It was just so awful. I wasn't a good mum with Jade. I was a druggie and I was into credit card fraud. This time, I promised myself I would have been a really good mother. To have lost the chance is heartbreaking."
Budden said the couple had initially been shocked but "over the moon" that they were expecting a child together. They were heartbroken after the loss and have since split.
Budden is reportedly planning to sue News International over claims the News of the World hacked Goody's phone during her cancer battle.
> Jade Goody's mum 'sells gifts from grave'