taxes
taxes
Am I liable for taxes if I do a DIL or a foreclosure? which one is better as far as my credit is concerned? I think a short sale would not work since I owe too much and wouldn't sell my house for much. I do not want to stay in my home in Detroit. Also, I was told my the bank that I could get some financial help on relocation since I have a FHA loan, but I thought that was just if I move out of Michigan, I plan to stay here. Any help would be appreciated.
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Welcome debbie,
If you go for a deed in lieu of foreclosure (DIL), then the lender will forgive the deficient balance resulting from the sale of the property. This will be considered as your income and you will be liable for paying off the taxes for the forgiven debt. However, depending upon the Mortgage Debt Relief Act, you may not be liable for paying the taxes. In case of a normal foreclosure, if you pay off the deficient balance to the lender, then you won't be liable for paying taxes. Both of them will affect your credit negatively and lower your scores by 250 points.