What Do I Need to Know About a Deed In Lieu of Foreclosure?
Are you looking to sell house before foreclosure? Is there another option to consider when you can’t make your mortgage payments?
When a borrower fails to make payments, they’ll face foreclosure, a process through which the lender repossesses the property. Borrowers can miss four payments before the danger of foreclosure arises. This amounts to around 120 days, which means anyone who has missed one or two payments has some time to come up with a plan.
DON’T FILE DEED IN LIEU – IT WILL STAY ON YOUR CREDIT FOR 7-10 YEARS
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Should I File Deed In Lieu of Foreclosure On My House
Options for Avoiding Foreclosure
This situation is a property owner’s worst nightmare. Naturally, after investing in a property, losing it can be devastating. What’s even worse is the impact a foreclosure can have on one’s record. A foreclosure remains on record for seven years and will lower the borrower’s credit score by up to 300 points.
If you’re a borrower facing this tough situation, you’ll want to consider your options, including:
- Sell house before foreclosure.
- Deed in lieu of foreclosure.
- Modifying the loan.
- Bankruptcy.
What is a Deed in Lieu?
This is a good option for certain borrowers. Rather than enduring the stressful foreclosure process and facing all the consequences that come with it, the borrower can instead sign over the property deed to the lender. The borrower then gets to walk away.
There are negatives to this route, but for many borrowers, it’s still a better option than foreclosure or bankruptcy.
DON’T FILE DEED IN LIEU – IT WILL STAY ON YOUR CREDIT FOR 7-10 YEARS
CALL US NOW! ITS FREE TO CALL 678-540-4725
We Buy Houses CASH to prevent foreclosure, allowing you to buy another home sooner. Call us today! WE BUY HOUSES NATIONWIDE IN ANY CONDITION!
Things to Try First
Some borrowers have more options than others. Loan modification is a process that involves restructuring and extending the remaining debt so the borrower can keep making payments. It’s good for people who have the most to lose, such as those who’ve built up a significant amount of equity. However, not every borrower will qualify.
To sell house before foreclosure is another option. If the value of the property is well over what’s owed, the borrower can simply sell it. If the property is worth less than the remaining mortgage, the only option to sell house before foreclosure is what’s known as a “short sale.” Prior to the sale, the borrower must contact the lender. The parties may agree that the lender will forgive any difference between the total from the sale and the amount owed on the mortgage. Much like loan modification, the borrower must qualify to sell house before foreclosure.
Pros and Cons of a Deed in Lieu
The Cons
The Borrower Must Leave
Unlike some options, such as loan modification, this choice requires giving up on the home. Each lender will have unique requirements regarding when the borrower must vacate the property once the deed has been transferred. Some lenders will force the borrower out immediately, and others will give them some time to find a new living situation.
There Will be a Credit Penalty
A deed in lieu remains on your credit history for up to seven years and can drop your credit score 50 to 100 points.
The Borrower Could Owe Taxes
The lender may choose to refrain from pursuing a payment of deficiency for the difference between the property value and the remaining mortgage. If so, the borrower will have to pay taxes on the forgiven amount.
The Pros
Financing Another Home Will be Possible
Although a deed in lieu does affect a borrower’s credit, it won’t necessarily prevent them from financing another home in the future. It’s much better than having the actual foreclosure on record. It’s possible to qualify for another traditional mortgage within two years of the completion of the deed transfer.
The Lender May Offer Moving Assistance
In general, accepting the deed is a good option for a lender. It saves time, and there’s a lower risk of problems, such as the borrower getting angry about being forced out and destroying the house. Due to the fact that someone facing foreclosure might not have the financial means to find a new home, the lender may offer up to $3,000 to help with moving expenses. This ensures the borrower leaves the home quickly, and the entire process isn’t delayed.
Are you facing a foreclosure? Before you make any decisions, consult an attorney. A qualified attorney will be able to guide you through the process of working with your lender, ensuring the best outcome is possible.