Posted on: 10th May, 2006 01:22pm
If you're not able to pay your mortgage and you can't sell the home or get a work out plan, a deed in lieu of foreclosure is your third option. This option allows you to transfer the property to your lender in exchange for being released from your mortgage.
Does deed in lieu of foreclosure affect credit score?
When you go for deed in lieu of foreclosure, it affects your credit score. Your score will drop by 250 points or so and will stay on your credit report for 7 years. After 7 years, you can have the deed in lieu removed from your credit report and start to rebuild your credit. At the end of the 7th year, you can request the bureaus to remove it from the report.
How long after deed in lieu can you buy home?
Because a deed in lieu has a negative impact on your credit, lenders won't offer you a mortgage for the first 2-3 years. In the meantime, if you try and rebuild your credit the chances are that you may be approved for a loan after the 2-3 years has expired. After that you can buy a new home.
Related Forum Discussions:
my wife and i along w/another couple bought a 2 family with an agreement that one resident would buy the property in one year, he defaulted and left us with a ton of damage and bills. long story short we ended up doing a deed in lieu on the property. our wives were the primary lendees on the mortgage as a result we are seeing a major hit on her credit score taking it down to a 660 or so. lenders can't use her on a loan if we want to refinance or anything because they say the hit disqualifies her. we did not enter this deal to go into the hole, we worked real hard for many years to keep our credit very very good and this one property seems to have wrecked us, we don't have a ton of money, we work hard and have a small home of our own that we would like to refinance, i am getting no's from lenders. i really need some help and i feel hopeless at this point. i just don't want to see all that my wife and i are working for shot because of one bad deal that we only entered into because one tenant wanted to buy the place and take care of it and then we got stuck with it. it took thousands out of our pockets before the deed in lieu. as i said other than that we have had excellent credit, mine is over 740-750. please offer any advice, it is truly truly appeciated. i feel that we are good hard working people and we just don't want to feel hopeless.thank you so much, matt long
What is an anti merger clause? Also, should I hire a lawyer to oversee the deed in lieu transaction?
Hi gnatnoop!
Welcome to forums!
Anti-merger clause is a clause in a mortgage or deed of trust specifying that the senior or the primary lien holder will retain lien priority in the case of a merger.
You can negotiate with the lenders in order to get your request for a deed in lieu transaction accepted. However, if you do not feel confident, then you should contact an attorney and he will assist you in this regard.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Anti-merger clause is a clause in a mortgage or deed of trust specifying that the senior or the primary lien holder will retain lien priority in the case of a merger.
You can negotiate with the lenders in order to get your request for a deed in lieu transaction accepted. However, if you do not feel confident, then you should contact an attorney and he will assist you in this regard.
Feel free to ask if you've further queries.
Sussane
I pay PMI on my home in Las Vegas Nevada. I know this protects the lender,but will this free me from my debit
Hi Guest!
Welcome to forums!
If you're unable to pay off the dues, the PMI will help you in paying off the deficient balance to the lender.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If you're unable to pay off the dues, the PMI will help you in paying off the deficient balance to the lender.
Feel free to ask if you've further queries.
Sussane
My wife and I filed bankruptcy 5 years ago and we did not re-affirm on our 1st and 2nd mortgages. The current value of our home vs. our total amount owned is a negative $50k... So we are thinking about handing the home over to the mortgage company. Would a deed in lieu be a good idea for us to do? Also since we had already filed bankruptcy would the deed in lieu still affect or credit?
Thanks
Thanks
where do you start when opting for a dil? If health is a factor but you are not behind on mortgage will a lender take the health issue into consideration?
MY DAD PASSED IN 2008, THE MORTGAGE IS IN HIS NAME BUT THERE ARE 6 SIBLINGS ON THE DEED, THERE IS A BALANCE OWED $44,000.00 AND NO MONEY LEFT IN HIS ESTATE. THE PROPERTY IS NOT SELLING, HAVE NOT FOUND A RENTER AND SIBLINGS CANNOT AFFORD THE MORTGAGE/PROPERTY TAXES. WHAT CAN BE DONE?
hi bobby,
you can apply for a deed in lieu of foreclosure in order to get rid of the property. in case of a deed in lieu of foreclosure, the lender won't come after you for the deficient balance. i don't think it will affect your credit as the account was already included in your bankruptcy filing.
to guest,
the lender may take the health issue into consideration. you should write a hardship letter to the lender and apply for a deed in lieu of foreclosure.
to justme,
though you and your 6 siblings are on the property deed, you all are not responsible for the mortgage payments personally. you and your siblings can surrender the property to the lender and get rid of it. the lender will sell off the property and recover as much dues as possible.
you can apply for a deed in lieu of foreclosure in order to get rid of the property. in case of a deed in lieu of foreclosure, the lender won't come after you for the deficient balance. i don't think it will affect your credit as the account was already included in your bankruptcy filing.
to guest,
the lender may take the health issue into consideration. you should write a hardship letter to the lender and apply for a deed in lieu of foreclosure.
to justme,
though you and your 6 siblings are on the property deed, you all are not responsible for the mortgage payments personally. you and your siblings can surrender the property to the lender and get rid of it. the lender will sell off the property and recover as much dues as possible.
I bought a home about 5 years ago when they were handing out loans to everyone. Since then as you know the market has taken a dive and my property dropped in market value substantialy. I want out of my house so I can move but the value just isn't there. What route would my best option to get out of this upside down loan without taking a major hit financially or credit score wise? It's not an issue of not being able to afford it, I just want out.
Hi Tim!
Welcome to forums!
As you don't want your credit scores to get lowered much, it will be a good option to apply for a short sale with your lender. A short sale will reduce your credit scores by 75-100 points but you will be liable for paying off the deficient balance to the lender.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
As you don't want your credit scores to get lowered much, it will be a good option to apply for a short sale with your lender. A short sale will reduce your credit scores by 75-100 points but you will be liable for paying off the deficient balance to the lender.
Feel free to ask if you've further queries.
Sussane
my ex and i filed chapter 7 in our divorce which included the house...i have since lived here and from what i understand the payments i make are voluntary....i can no longer afford this home and wish to purchase a lower cost home....the mortgage on my current home doesnt show up on credit report...the bank approved a short mortgage when i get a contract...will this show up on credit report even though i'm not financially responsible for mortgage d/t bankruptcy?
Hi bas,
Unless the property is sold off at an auction, it will be mentioned in your credit report. You should ask your lender to sell off the property asap. However, as a negative item, it will remain in your credit report for the next 7 years.
Thanks
Unless the property is sold off at an auction, it will be mentioned in your credit report. You should ask your lender to sell off the property asap. However, as a negative item, it will remain in your credit report for the next 7 years.
Thanks
I offered my house because of a family hardship and my house had been on he market for about 1 year and had no result. My house was apparised for about 15,000.00 more that was owed on it. When I did the deed in leiu the mortgage reduced the house and called it fair market value and sent me a 1099C can they do this????
Hi clp!
Welcome to forums!
The property may have sold off at a reduced value and thus that value is mentioned on the 1099c form. As the debt has been forgiven, the IRS will consider this as your income. However, if it is your primary residence, then you won't have to pay any taxes as per the Mortgage Debt Relief Act.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
The property may have sold off at a reduced value and thus that value is mentioned on the 1099c form. As the debt has been forgiven, the IRS will consider this as your income. However, if it is your primary residence, then you won't have to pay any taxes as per the Mortgage Debt Relief Act.
Feel free to ask if you've further queries.
Sussane
WHEN DO YOU START COUNTING THE 7 YEARS OF A DEED IN LIUE? AFTER HOUSE IS SOLD BY BANK? AFTER YOUR ACCT IS CONSIDERED IN DELINQUENT STATUS? MY DEED IN LIUE TOOK AROUND 2 YEARS.